Waiting for the economy to turn into sunshine and rainbows overnight? Don’t hold your breath. 🫢 Speaking of breath holding, a whole lot of American drivers are underwater on their car loans. 🥴🌊 In other words, they owe more moolah than what their vehicle’s worth.
Just how bad is this problem? What should you do if you’re currently car shopping? Keep reading for some words of wisdom. ⬇️
Here’s Five Fast Facts on underwater trade-ins:
- 🏊 Drown Town - According to the car gurus at Edmunds, from April to June 2025, roughly 26.6% of trade-ins toward new car purchases were underwater. That’s up from 25.1% from January to March and the highest it’s been in four years. The upside is that back in 2021 about 32% of trade-ins were upside-down. So, progress is progress, right?
- 🚗 By the Numbers - But what about RAW numbers? Just how much money are we talking about? The average amount of negative equity is $6,754. Car shoppers have only two options: pay off that balance at trade-in or roll it into their new car loan.
- 💵 Loan Lengthener - One reason for the uptick in upside-downs is that longer auto loans are becoming more common. Extending the length of a car loan decreases the monthly payment. So far in 2025, around 21.6% of new auto loans were 84 months long, up from 19.2% in the beginning of the year.
- 🚨 Total Bummer - Being upside-down on a car loan isn’t an issue for folks who currently drive the vehicle. However, if your car’s totaled in an accident, you could be on the hook. Insurance will typically pay the cash value of the car, but it could be for less than what you owe. Pro tip: GAP insurance helps.
- 🧑💻 Talking Shop - If you’re underwater on your car loan but absolutely need a new vehicle, make sure to do your research. Try to roll any current loan balance into a lower-interest option to save money. Shop around different lenders and look for the best offer before hitting the dealership.
🔥Bottom line: The best thing to do if you’re locked into a lengthy car loan? Ride it out (no, literally). Looking for a new income stream to pay off that car loan? ChatGPT could be the answer. In this article, we share tips on how to earn an extra hundred (or two) with everyone’s favorite AI tool.
Shopping for a new ride?
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