Among the news of all the shiny new models coming for 2025 and beyond is a dark reality looming over the auto industry: Millions of people are upside down on their auto loans, and the amounts owed are at their highest level ever.
According to Edmunds’ Q4 2024 data from owners trading in their vehicles for a new one, one in four car buyers (24.9 percent, specifically) are underwater on their auto loans, up from 20.4 percent in 2023. Making matters worse, 24.6 percent of those buyers have negative equity of more than $10,000, a figure that has increased by 2.3 percent since 2023.
Jessica Caldwell, Edmunds’ head of insights, says this number isn’t just alarming because of the amount owed, it’s alarming because this seems to be the first time that the amount buyers are underwater by is “hitting the double-digit mark.”
Negative equity isn’t a brand-new phenomenon in the auto lending space — in fact, it wasn’t too long ago when more than a third of trade-ins toward new-car purchases were upside down. What’s particularly alarming in the Q4 figures is that a growing share of trade-ins are hitting the double-digit mark in thousands of dollars owed, making the cycle far more challenging for consumers to escape.
The Edmunds data from Q4 2024 also shows that buyers who were upside down on their trade-ins willingly made their financial situations even worse. On the monthly payment end, buyers saddled themselves with an additional $159 in monthly payments. On the total amount owed side, buyers end up paying more in the long run to the tune of $12,388, which is more than the industry average for new vehicle loans.
The rising cost of new cars isn’t helping things either, as automakers don’t seem to be in the business of making affordable cars anymore. In October 2024, the average new car price was just over $47,000. The EV push is another troubling factor. Buyers have been moving to electric cars, but many have horrible resale values; if you purchased an EV in 2021-22 when inventories were low and markups were high, you might be upside down right now.
As Edmunds says, if you’re in the unfortunate situation of being underwater on your car loan, the best thing to do is not to get another car and roll that negative equity on to something else. You have to keep the car for as long as you can and make those payments regularly. If you’re able to, pay more to beat the interest as well. It might take you a while, but you’ll be in a better financial situation because of it.