More Car Buyers Roll Underwater Loans Into Costly New Deals

Car buyers are dragging more old debt into new deals, and the tab is getting heavier, CNBC reports. JD Power estimates about 30.5% of people trading in a vehicle on a new purchase now owe more than the car they're trading in is worth, up 4.2 percentage points from last year and roughly back toward pre-pandemic norms. The issue isn't new, analysts say, but the size of the shortfall is: Edmunds reports the average "underwater" amount hit a record $7,214 in late 2025, with more than a quarter of those owners buried by at least $10,000 in negative equity—another record high.

That negative balance usually doesn't vanish—it's folded into the next loan, pushing the average monthly payment for these buyers to a record $916, compared with $772 for new-car loans overall. The squeeze traces back to a pandemic-era market where buyers often paid above sticker, and to today's much higher prices: the typical new vehicle cost $49,353 in February, up about 30% from early 2020. To cope, more borrowers are stretching loans to seven years; among new purchases with negative equity, 40.7% are now financed over 84 months. For now, serious delinquencies sit at about 1.5%, roughly where they were in 2019.

"Loans that originated when prices were elevated are now aging into a market where values are no longer inflated, making the gap between what many buyers owe and what their vehicle is worth more apparent," Edmunds explained in January. "Combined with higher borrowing costs in today's market, that dynamic has left more buyers facing steeper financial trade-offs when it comes time to replace a vehicle—and has made negative equity harder to escape once it takes hold."