Posted on 10/29/2026 11:19:34 AM PDT by thegagline
America's negative equity problem is entering a more expensive phase. While the share of underwater trade-ins toward new-vehicle purchases has edged down since the start of 2026, it remains higher than a year ago and has increased year over year for four consecutive years. Meanwhile, the average amount owed on those vehicles has reached its highest Q3 level in at least a decade, making it increasingly costly for buyers to carry that debt into another purchase
In Q3 2026, 29.1% of trade-ins with outstanding loans toward new-vehicle purchases were underwater, down slightly from 30.9% at the start of the year but up from 28.1% in Q3 2025. Buyers trading in those vehicles owed an average of $7,107 more than their cars were worth,over $1,800 above comparable prepandemic levels. Between 2016 and 2019, roughly one-third of financed trade-ins were underwater, but the average deficit typically ranged between $5,000 and $5,500.
The financial consequences of rolling negative equity into a new auto loan have grown considerably in recent years. In Q3 2026, consumers who traded in an underwater vehicle and rolled their unpaid debt into a new loan financed an average of $57,235, up 44.1% from $39,732 in Q3 2019. Their average monthly payment climbed 47.4% over the same period, from $646 to $952.
Higher loan balances and interest rates are also driving up the total cost of borrowing. At an average APR of 8.1%, buyers who rolled over negative equity in Q3 2026 are on track to pay an estimated $16,610 in interest over the life of their loans, up nearly 83% from $9,093 in Q3 2019. Nine in 10 of these buyers (91.2%) financed their purchases over 72 months or longer, extending their payment obligations and increasing the risk of remaining underwater for longer.
(Excerpt) Read more at edmunds.com ...
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1) Generally, it is better to buy a used vehicle than a new one.
2) I question the sanity of anyone who takes out a loan, especially a substantial loan, on depreciating asset.
3) The Rule of 72 can be your best friend or worst your enemy.
I worked for GMAC a long time ago, and it was scary how many people who had decent jobs and good credit ended up with repos because they did not understand how much money they could afford monthly for a car payment and insurance.
I have had one new car loan in my life, it was a 36 month loan and I hated every single month of it.
Strangely even though I don’t have that car anymore currently newest is the same year as that one was
The problem with used cars nowadays can be traced to POTUS Obama’s cash for clunkers campaign.
So many older cars removed from circulation all at once caused a shortage in the used car market. The prices for used cars skyrocketed; add in the increased interest rates, and you have a perfect storm for middle class folks. 😕
Yes but people do it - in fact probably most new car buyers do. I never actually understood how they afford it. After gas, groceries and clothing, I barely have enough money left.
In between chemistry jobs I tried selling cars for a few days. The only sale I made was for a dually to a kid who I knew couldn’t afford it. That was my last day. I never came back.
If they still have a loan on their current car then their current car must not be that old. What do people upgrade cars so frequently for? Safety features? Warranties? High mileage driving? New car smells?
Additionally, the EPA and remote stop technologies cause price problems.
Even fuel causes problems on newer cars that older ones don’t get. Direct injected engines easily have their tiny holes clog. Buy Top Tier Gas to prevent that.
I, too, have only had one new car and that was a 36 month loan, as well.
2. The problem comes when the term of the loan exceeds the life cycle of the asset. Taking out a five-year loan for a new vehicle and then driving that vehicle for ten years is a king move. Rolling negative equity on a vehicle into a new vehicle loan is retarded.
Gotta have those monster trucks.
My current ride is a 2008 Ford Escape with 160,000 miles. Bought it used. Had to get a new transmission at about 140,000 miles, which is typical. Insurance is less than $60/month.
My wife’s car is a 2015 loaded Honda Accord. Had 12,800 miles on it when we bought it used in 2016. I’m not going to say she drives many miles, but it only has 50,500 miles on it now. It’s also in nearly new condition. We could have paid cash, but the interest rate was only 2.3%.
Never buy a new car because they lose at least 12% of value as soon as you drive it off the lot.
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