Negative Equity Report: The Problem Worsens

Americans continue to owe more on their car loans than their vehicle is worth in record numbers. According to the latest vehicle transaction data from Edmunds, in the second quarter of 2026, consumers trading in their vehicle on a new-vehicle purchases continue to carry record amounts of negative equity on their existing loans. (Negative equity is also called being "underwater" or "upside down". Car Pro Show host Jerry Reynolds explains what to do if you find yourself in this situation in his advice article here. )

Edmunds second quarter 2026 data reveals:

• Nearly 3 in 10 trade-ins toward new vehicles are in an underwater position, the highest Q2 figure since 2020: Edmunds data shows that 29.6% of trade-ins toward new-vehicle purchases had negative equity in Q2. Researchers say this is down slightly from the 30.9% share recorded in Q1, but represents an increase from 26.6% in Q2 2025 and is the highest Q2 mark since 2020 (37.2%).
• The average amount owed on upside-down loans hit a record high for a Q2: Data shared by Edmunds also reveals the average negative equity amount in Q2 2026 was $6,884, which is the highest for a second quarter on record, compared to $7,183 last quarter and $6,754 in Q2 2025.
• Climbing negative equity is leading to record average monthly payments and interest costs: The average monthly payment for a new-vehicle loan with negative equity on the trade-in reached $944 in Q2, the highest figure Edmunds says it has on record and $167 more than the industry average of $777 in Q2.  Researchers say buyers rolling negative equity into a new loan are projected to pay an average of $16,270 in interest over the life of that loan, another all-time high and nearly $6,500 more than the $9,811 paid by the average new-vehicle buyer in Q2 this year.
• The average age of underwater trade-ins inched up to a Q2 record: The average trade-in age of vehicles with negative equity reached a Q2 record of 4.0 years this past quarter, up from 3.8 years in Q2 2025 though down from 4.3 years last quarter. Edmunds analysts note this aligns with vehicle purchases made in 2022, a period characterized by limited inventory, minimal incentives, and transactions at or above MSRP, which set the stage for current long-term negative equity positions.

"Consumers are incurring more debt than ever when trading in vehicles that are underwater," said Jessica Caldwell, Edmunds' head of insights. "Buyers who financed at 2022's peak prices are starting to come back to trade in, and they're bringing thousands of dollars in old debt with them. With interest rates still elevated, this is creating a costly snowball effect for consumers. As buyers roll over their negative equity, their new loan principals swell. Relying on longer loan terms as a coping mechanism to keep monthly payments down only causes total interest charges to be higher in the long run."

Edmunds says its analysts conducted an analysis of the models holding the highest volumes of negative equity as trade-ins in Q2 2026. Their findings reveal that even highly regarded vehicles known for holding their resale value are not immune to financing challenges. The list features popular trucks and SUVs, alongside traditional residual winners:

TRADE-IN MODELS WITH THE HIGHEST NEGATIVE EQUITY IN Q2 2026 - Edmunds

"It's easy to assume negative equity is just a story about vehicles that depreciate quickly, but some of the biggest dollar losses we're seeing are on trucks and sedans that traditionally hold their value better than most," said Ivan Drury, Edmunds' director of insights. "When historically safe residual value bets are showing up underwater, it's clear this is a financing problem, not always a vehicle choice problem. These examples are a harsh reminder that a great vehicle choice can still be completely undermined by a punishing loan structure."

For car owners considering a new-vehicle purchase, Edmunds experts recommend that they review their loan payoff amount and compare it to their vehicle's current trade-in value to understand if they're underwater, a crucial first step in making more informed auto-related finance decisions.

Shoppers can proactively manage their auto debt by using Edmunds' free appraisal tool to identify their current vehicle's value and track its shifting value history over time here on Edmunds. For consumers who are underwater on their existing loan but in the market for a new car, Edmunds analysts suggest prioritizing a long-term fit over any short-term incentives.

"Selecting a vehicle that fits your needs with the right financing terms will save more money in the long run than chasing any temporary manufacturer discounts or dealership incentives," said Drury.

EDMUNDS Q2 NEGATIVE EQUITY DATA

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