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30.9% of Q1 2026 new-vehicle trade-ins were underwater on their loans—the highest…

2026-05-10 · 10:57 UTC ·@aakashgupta ·1 min read

Brief

Auto buyers who financed new cars in 2022–2023 are increasingly underwater: 30.9% of Q1 2026 trade-ins owe more than the vehicle is worth, averaging a $7,183 shortfall. Long 84‑month loans at ~7.9% push positive equity years out, dealers roll negative equity into larger 84‑month loans, and repossessions are rising toward Great Recession levels.

Why it matters

30.9% of Q1 2026 new-vehicle trade-ins were underwater on their loans—the highest share since Q1 2021—with an average shortfall of $7,183; Edmunds says the average underwater trade-in is 4.3 years old and 9.3% of borrowers owe more than $15,000.

Key details

  • Example: a $45,000 new car financed for 84 months at 7.9% APR costs about $700/month; after two years the buyer has paid $16,800, reduced principal by roughly $10,000, while the car is worth ~$30,000 and the remaining loan is ~$35,000 (about $5,000 underwater).
  • Dealers roll negative equity into new loans: Q1 buyers financed an average $55,970 at 7.9% over 84 months (about $932/month), increasing financed amounts, total interest, and amortization length; Cox Automotive reported 1.73 million repossessions in 2024 and forecasts 2025 repossessions to exceed 3 million.
Source evidence

If you financed a new car in 2022 or 2023, there's a 1-in-3 chance the car is now worth less than what you still owe on it.

30.9% of Q1 2026 new-vehicle trade-ins were underwater on the loan. Highest share since Q1 2021. Average shortfall: a record $7,183.

The 84-month loan is doing this.

A $45,000 new car on 84 months at 7.9% APR costs $700 a month. By year two you've paid $16,800 to the lender. The principal has moved roughly $10,000. The car is worth $30,000. You owe $35,000 on something worth $30,000. Five thousand dollars underwater after 24 perfect payments.

The average American trades a car at 4 to 5 years. The loan is designed for 7. You exit before the math turns positive.

Edmunds Q1 2026: the average underwater trade-in is 4.3 years old and $7,183 in the hole. A record 9.3% owe more than $15,000.

The dealer has a fix. Roll the negative equity into your next loan. Q1 buyers doing this financed $55,970 on average, $12,000 more than typical, at 7.9% APR over another 84 months. Monthly payment: $932, a record high. Total interest over the term: $15,663 versus $9,592 for the broader market.

That's the loop. The negative equity from car one becomes the down payment on car two. The new loan absorbs the old debt and resets the depreciation clock on a car that starts underwater the day you drive it home.

Cox Automotive: 1.73 million repossessions in 2024, the highest since 2009. The 2025 forecast pushes past 3 million, a level only matched in the Great Recession peak.

The 84-month loan turned $50,000 cars into $700 monthly payments. Positive equity arrives after the trade.

The depreciation curve never changed. The amortization schedule moved.