Near-Record Negative Equity on Car Trade-Ins
Bottom line: One‑fourth of recent trade‑ins carry more than $10,000 in negative equity, and the average amount owed is $7,214.
Near-Record Negative Equity on Car Trade-Ins: What It Means for Buyers
Image: Near-Record Negative Equity on Car Trade-Ins: What It Means for Buyers – Performance Comparison and Specifications
What Is Negative Equity?
Negative equity happens when the loan balance on a vehicle is higher than what the car is worth today. In plain terms, you owe the bank more than you could sell the car for. This situation is often called being “underwater” or “upside‑down” on a loan.
Why Trade‑Ins Are Getting Underwater
Three main forces are pushing the numbers higher:
- Longer loan terms: Six‑year loans are common now, so borrowers carry debt for longer periods while the car’s value drops faster.
- Higher initial prices: New‑car prices rose sharply in the past few years, creating a bigger gap between loan amount and resale value.
- Rapid depreciation: Modern vehicles lose 15‑20% of their value in the first year, leaving many owners with a sizable shortfall.
When owners try to trade in these cars, the dealer must cover the gap, which often gets added to the new loan.
Price Impact & Market Rivals
Rolling negative equity into a new purchase inflates the financed amount, meaning higher monthly payments and more interest over time. It also puts pressure on rival dealers who may offer cash‑back deals to attract buyers without the extra debt.
| Engine | Mileage | Price | Top Features |
|---|---|---|---|
| 2.0L I4 | 35,000 mi | $22,500 |
|
| 3.5L V6 | 48,000 mi | $28,900 |
|
| 2.5L Turbo | 27,000 mi | $31,200 |
|
FAQ
- What is the average negative equity on a trade‑in? About $7,214 according to the latest data.
- Can I avoid rolling negative equity into a new loan? Yes – negotiate a cash payment for the gap or choose a less expensive vehicle.
- Is it worth trading in a car with $10,000 upside‑down? It depends on your cash flow; the added debt will increase future payments.
Have you dealt with underwater trade‑ins? Share your story in the comments below.
Source: Read Official News
