By Naveen Athrappully
The average amount car owners owe on upside-down loans—where people owe more than the value of their vehicle—hit a record high of $6,905 in the third quarter of 2025, exceeding the previous high set in the first quarter, industry expert Edmunds said in a statement published on Oct. 15.
“A growing share of owners are trading in vehicles worth less than what they owe—and the debt they are rolling forward is only growing,” the company said.
In Q3, 28.1 percent of cars traded in for new vehicles had negative equity, where the car is worth less than its loan amount. This is up from 26.6 percent from the previous quarter and is the highest share on record since the first quarter of 2021, Edmunds said.
Nearly one in four cars traded in with negative equity had over $10,000 in debt, marking a new high.
The company’s analysts characterized the rising negative equity of vehicles as underscoring “broader affordability challenges.”
“The sheer amount of debt consumers are carrying in their trade-ins should be a wake-up call,” Ivan Drury, Edmunds’s director of insights, said.
“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,” Drury added.
The negative equity is rising amid an environment of higher car prices. In an Oct. 13 statement, vehicle valuation company Kelley Blue Book (KBB) said that the average transaction price (ATP) of a new vehicle crossed $50,000 in September for the first time ever.
The ATP was up by 3.6 percent from last year, the largest annual gain since spring 2023, it said.
“The $20,000 vehicle is now mostly extinct, and many price-conscious buyers are sidelined or cruising in the used-vehicle market,” Erin Keating, executive analyst at auto services company Cox Automotive, which owns KBB, said.
“Today’s auto market is being driven by wealthier households who have access to capital, good loan rates, and are propping up the higher end of the market.”
In an Oct. 15 statement, Cox said that new vehicle affordability remained tight in September.
Even though buyer incomes grew, car sellers began offering more incentives, and auto loan rates fell marginally, the affordability challenges faced by consumers have remained high due to an increase in new vehicle prices, according to the statement.
The typical payment for a new vehicle rose by 1.9 percent to $766, which was the highest monthly payment in 15 months, according to Cox. The number of median weeks required to buy an average new vehicle rose from 36.8 weeks to 37.4.
Cox also reported that the inventory of new vehicles rose in September amid a slower sales pace, according to an Oct. 16 statement from the company.
There were 2.87 million new vehicles available at dealer lots at the beginning of October, up by 4.8 percent from the prior month.
Looking ahead, Cox said it was expecting vehicle sales to further cool in the fourth quarter, citing higher prices at the retail level.
“With slower sales, days’ supply is expected to increase further, which will likely lead to higher incentive levels. In September, as vehicle prices marked an all-time high, the average incentive package peaked for 2025 at 7.4 percent of ATP.”
Meanwhile, the Trump administration is expanding its tariffs on foreign vehicle imports in its attempt to boost domestic production.
Earlier this year, the administration imposed a 25 percent tariff on imports of automobiles and auto parts. On Oct. 17, President Donald Trump signed a proclamation that expanded the tariffs to medium- and heavy-duty trucks, instituting a 25 percent tariff on the imports of these vehicles and their parts.
Earlier this week, automaker Stellantis said it will spend $13 billion over the next four years to boost manufacturing capacity in the United States.
Production of the Jeep Compass, previously scheduled for Ontario, Canada, will be moved to Illinois, the company said.
