Average negative equity on vehicle trade-ins hits $7,183 in Q1

With rising vehicle prices and a shift toward longer loan terms, more customers are saddled with higher negative equity. As new-vehicle prices increase and interest rates stay high , the average auto customer with negative equity, or debt rolled into their next car loan, could face monthly payments near $1,000, Joseph Yoon , consumer insights analyst at car-shopping website Edmunds , told Auto Finance News . “Car prices have been sky high for quite some time now … paired with that, we’re having to deal with very high interest rates. So when you’re bringing over $7,000 on average of negative equity … it becomes ugly for a lot of people.” — Joseph Yoon, Edmunds Around 30.9% of trade-ins for new-vehicle purchases held negative equity in the first quarter, according to an Edmunds report published April 20. Of those, the average negative equity was $7,183 in Q1, the second-highest quarter Edmunds has recorded. [caption id="attachment_58360834" align="aligncenter" width="717"] (Courtesy/Edmunds)[/caption] Of consumers who were underwater, 26% held negative equity exceeding $10,000, according to Edmunds. The impact of negative equity on lenders’ portfolios varies in part due to their target consumer base. Pittsburgh.-based lender PNC Financial ’s share of auto consumers with negative equity has not grown at the rate Edmunds reported, Senior Vice President of Product Strati Papageorge told AFN . “Negative equity, that’s definitely a concern from an overall industry standpoint, [but one] we have not seen,” he said, noting PNC primarily lends to prime and super prime customers. Longer loan terms The rise in consumers upside down on their vehicle loans comes as more consumers agree to longer loan terms . Nearly 43% of borrowers took out 84-month auto loans in March, according to refinancer Caribou ’s auto refinance trends report published April 15. The share of 84-month auto loans on Caribou’s platform also rose 11% quarter over quarter in Q1. “The term of loans and the average lifespan of a vehicle are moving in parallel.” — Eric Stradley, Caribou “The term of loans and the average lifespan of a vehicle are moving in parallel,” Caribou President Eric Stradley told AFN . Vehicles lasting longer could give consumers more time to pay down debt before trading in the car, he said. The average age of a traded-in vehicle with negative equity has risen YoY in 2026 to 4.3 years, but that isn’t “enough to close the gap” for 84-month loan consumers, according to Edmunds’ report. [caption id="attachment_58360835" align="aligncenter" width="717"] (Courtesy/Edmunds)[/caption] Customers with 84-month loans may not substantially dent their principal balance after years of paying on the vehicle, causing negative equity to be much larger than anticipated, Edmunds’ Yoon said. “Even having paid for four, 4½ years, you still haven’t made progress on paying off the loan,” Yoon said. “When you go to trade in the car, they’ll tell you, ‘No, you still owe $15,000 on this loan.’” As more lenders lean into 84-month loan terms , the average negative equity amount could increase depending on how 2024 and 2025 loan vintages perform, he said. “If [longer terms] are going to keep elevating the $7,000-plus number, or if the normalization of car loans in the past two, three years will bring that number down, that’s something we’re going to be talking about for the next year and a half to two years,” he said. Strati Papageorge will speak alongside leaders from Arivo Acceptance , BMO Commercial Bank and PenFed Credit Union at Auto Finance Summit East 2026, taking place May 11-13 in Nashville. To see the event and register, visit autofinance.live .

Federal Reserve announces emergency meeting on auto lending regulations • Click for details

MARKET SNAPSHOT

Risk Management

Average negative equity on vehicle trade-ins hits $7,183 in Q1

Related Posts

Lenders eye expanded leasing options as affordability challenges grow

Forward-flow picks up steam as private investors eye auto finance

Dealers fight growing transport fraud, when scammers impersonate shipping companies

Auto finance dealer strategies evolve as profitability tightens in 2026

Bank of America consumer vehicle net charge-offs tick down

CarMax Auto Finance originations down 1.5%

Wells Fargo Auto originations soar 110% YoY

Chase Auto originations down 3% YoY

Daily Intelligence Brief

Sponsored

Why credit unions give dealers an edge in today’s auto market

Driving better decision-making across auto finance operations with SAS

Auto finance’s first line of defense: Raising the standard in integrated software partnerships and data strategy

Driving Innovation in Automotive Refunds: How Onbe and Allied Solutions Are Modernizing the Payment Experience

Navigating the Margin Squeeze: EVs, Tariffs & Pricing — A Q&A with Earnix

Enhancing credit approaches to boost conversion and dealer loyalty

Tesla announces new fleet financing program

About

Company

Daily Newsletter