One in four Americans owe more on their car loan than

U.S. drivers who take out loans to buy their cars are increasingly finding themselves with negative equity, with a disturbing amount now being owed more than $15,000 more than the vehicle is worth, according to a new study.

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According to Edmunds data, the proportion of U.S. drivers who had an inversion on their car loan when they traded in their old car for a new one rose from 23.9% in the second quarter of this year to 24.2% in the following three months. To put things into perspective, this number was only 18.5% in the second quarter of 2023, a significant increase in just over a year.

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The amount owed on these inverted loans also increased, reaching an all-time high of $6,458 between July and September, compared with $6,255 in the second quarter of 2024 and $5,808 in the third quarter of 2023. Edmunds says the problem affects all vehicle segments from compact SUVs to full-size pickup trucks.

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But perhaps most concerning is the proportion of drivers who owe far more than $6,458. A total of 22% of U.S. drivers (more than one in five) have negative equity and owe at least $10,000 on loans, and 7.5% owe more than $15,000.

Edmunds experts blame the problem on unfortunate market conditions and poor financial judgment, explaining that many people who bought new cars at above MSRP during the pandemic and chip-related inventory crunch are now buying new cars at higher prices than MSRP. Suffering from lower trade-in values. Another factor is drivers taking out long-term loans and making deals too early.

Ivan Drury, Edmunds’ director of insights, advises drivers concerned about negative equity to keep their cars for as long as possible while making sure to maintain normal service schedules to prevent any unnecessary decline in value.

“With prices and interest rates so high, it’s critical for consumers to be honest about their own ownership habits in addition to their monthly payments,” Drury said. “If you know you’re not The kind of person who holds on to a vehicle for a long time, then a seven-year car loan is a one-way ticket to negative equity.”

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Q3 Negative equity