Why more car owners are ‘upside down’ on their loans
Jennifer Mattson
A growing number of car owners are finding themselves underwater on their auto loans, according to Edmunds The latest data from Edmunds for the The most recent data showed many Americans with upside-down “Consumers Drury “And as That tax deduction, which is tucked away in President Donald Trump’s massive 940-page tax bill that was signed into law July 4, allows many people, for the first time, to deduct interest on their vehicle loans; For more consumer information on underwater car loans, Edmunds offers advice in this guide. Shoppers can also use Edmunds’s appraisal tool to determine their car’s current value. ABOUT THE AUTHOR
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new data from the auto shopping website Edmunds.com. In short, that
means what they owe is larger than what the cars are actually worth.
reported that underwater trade-ins are at their highest record since
the first quarter of 2021, during the pandemic, when 31.9% of new-car
trade-ins were upside down.
second quarter of 2025 revealed that more than 1 in 4 new vehicle
trade-ins are underwater. Simply put, that means 26.6% of trade-ins for
new cars had negative equity, up from 26.1% in Q1 2025 and 23.9% in Q2
2024.
car loans owed, on average, $6,754 in Q2 2025—up from $6,255 for the
same period last year, but still slightly lower than for the first three
months of this year, when it was $6,880.
being underwater on their car loans isn’t a new trend, but the stakes
are higher than ever in today’s financial landscape,” Ivan Drury,
director of insights for Edmunds, said in a statement.
added that “affordability pressures—from elevated vehicle prices to
higher interest rates—are compounding the negative effects of decisions
like trading in too early or rolling debt into a new loan.
buyers take on new loans with much higher interest rates than those
from just a few years ago, even potential tax deductions can’t
meaningfully offset the thousands more they’ll pay in interest,” he
said.
and it is available whether or not taxpayers itemize deductions.
However, the vehicles must be new and assembled in the U.S., and the
loans issued no sooner than this year.
