Andresr | E+ | Getty Photographs
For a rising share of new-car patrons with a car to commerce in, an unwelcome a part of their outdated mortgage follows them of their new buy: destructive fairness.
An estimated 30.5% of automobile patrons with a trade-in owe greater than the automobile is price, in response to J.D. Energy’s automotive forecast for March. It is often known as being underwater in your mortgage or the other way up.
The share of underwater patrons is up 4.2 proportion factors from a 12 months in the past and has been rising since 2022. Nevertheless, it isn’t as excessive because it was earlier than the pandemic: In 2019, the annual share of trade-ins with destructive fairness for new-car purchases was 33.6%, in response to J.D. Energy information.
“The current pattern has been towards imply reversion,” stated Tyson Jominy, a senior vice chairman for J.D. Energy.
The common quantity owed on these underwater trade-ins reached $7,214 — an all-time excessive — within the fourth quarter of 2025, in response to auto website Edmunds. Additionally, 27% of those trade-ins carried $10,000 or extra in destructive fairness, additionally a file excessive.
“Whereas these ranges of destructive fairness are nothing new … it is the quantity underwater that’s the actual, and troubling, story,” stated Joseph Yoon, Edmunds client insights analyst.
Common cost for rolled-in destructive fairness is $916
While you commerce in a automobile with destructive fairness, the remaining mortgage steadiness sometimes will get rolled into the mortgage for the automobile you are shopping for. This successfully carries the outdated debt into the following car buy.
The common month-to-month cost for patrons who rolled destructive fairness into a brand new mortgage reached $916 within the fourth quarter of 2025, in response to Edmunds. That is a file excessive, and $144 greater than the common month-to-month cost of $772 for all new-car purchases.
In the course of the pandemic, trade-ins with destructive fairness dropped. In 2022, the yearly share was 16%, in response to J.D. Energy. After that, it began rising and hasn’t stopped.
“The information present the provision chain disaster, which drove up commerce values, was a low level for destructive fairness,” Jominy stated. “It is smart. When there have been fewer new automobiles available for purchase, there have been fewer customers coming again to market with trades, which pushed up [used car] values past natural demand for the sector.”
Common new-car value is $49,353
The common value of a brand new automobile in February was $49,353, in response to Kelley Blue Guide’s newest information. That is about 30.3% larger than in February 2020, when the common value was $37,876.
On common, the age vary of trade-ins with destructive fairness is 3 to 4 years outdated, in response to Edmunds — “which suggests these are automobiles that had been bought between 2022 and 2023, a very anomalous interval available in the market the place it wasn’t unusual to pay over the sticker value,” Yoon stated.
As automobiles have change into costlier, “patrons finance a bigger portion of the acquisition and prolong mortgage phrases to afford the funds,” stated licensed monetary planner Stephen Kates, a monetary analyst for Bankrate.
“Longer loans translate to … a better probability that the worth of the automobile falls under what’s owed,” Kates stated.
Amongst new-car purchases involving destructive fairness, 40.7% at the moment are financed with 84-month loans, in response to Edmunds information.
“Whether or not this development in destructive fairness results in future financial ramifications for patrons, each in occasion and quantity, stays to be seen,” Yoon stated.
Roughly 1.5% of auto loans are no less than 60 days late, in response to a current report from TransUnion. That is on par with the fourth quarter of 2019, when the share was additionally 1.5%.