Being upside down on your auto loan - when you owe more on your car than it's worth - is something Car Pro Show host Jerry Reynolds warns listeners about frequently. He also addresses the topic here. Unfortunately, it's a position that more car owners are finding themselves in. New Edmunds 2025 Q3 data reveals that the average amount owed on upside-down auto loans is at an all-time high of $6,905. Its research shows that a record nearly one in four vehicle trade-ins towards new car purchases with negative equity carried more than 10,000 in debt.
Here's some of the data shared by Edmunds:
Edmunds analysts are warning of the long-term consequences of consumer auto debt.
"The sheer amount of debt consumers are carrying in their trade-ins should be a wake-up call," said Ivan Drury, Edmunds' director of insights. "Nearly one in three upside-down car owners owe between $5,000 and $10,000 — and a growing share owe far more than that. Much of this stems from shoppers trading out of vehicles too quickly, or carrying loans taken out during the pandemic car market frenzy, when prices were at record highs. Those choices are now catching up, making it far harder to buy again without piling on even more debt."
Rolling negative equity into a new vehicle purchase will typically result in more money financed and a higher monthly car payment. This is seen in a new Edmunds analysis. Its analysts compared the costs for consumers who financed a new vehicle involving a trade-in with negative equity in Q3 against the industry average for all financed new vehicles. The average monthly payment for buyers who rolled negative equity into a new loan was $907 in Q3, down slightly from Q2's high of $915 and $140 more than the overall industry average monthly payment of $767. Analysts say they also financed $11,164 more than the typical new-vehicle buyer.
While Edmunds analysts say the growing amount of negative equity underscores broader affordability challenges, they also note that consumers still have opportunities to make smarter financial moves. Car Pro Host Jerry Reynolds says it's important for car shoppers to know where they stand in their current vehicle before trading in or taking on new debt. He walks you through exactly how to get a good idea on whether you are upside down, or if you have equity here.
Edmunds also provides this advice:
"For many car owners, there's no quick fix for being underwater. It's about minimizing how much deeper you go," said Joseph Yoon, Edmunds' consumer insights analyst. "If you can, wait until you've paid down more of your balance before trading in. But if you do need to replace your car, make sure your next purchase fits your budget, not just your needs. The right vehicle choice can prevent a short-term decision from becoming a long-term setback."
Edmunds analysts also advise car buyers to review their loan paperwork before turning in a vehicle. Look for add-on products like extended warranties, service contracts, or wheel-and-tire protection. If you opt to canceling these agreements, even if the refund is prorated, Edmunds says it can help chip away at the amount owed on the loan and slightly improve the payoff-to-value balance.