More Americans than ever before are upside down on their car loans, according to a new study by Edmunds. In other words, a whole lot of us owe a whole lot more than our cars are worth.
In fact, one in four people who buy a new car are instantly upside down, looking at the third quarter of 2024. The average amount? Just over $6,800. A quarter of new car drivers also have more than $10,000 in negative equity.
Overall, that costs the average American $159 per month, or close to $12,500 over the life of the loan.
“The ramifications for trading in a vehicle well below sea level for a brand-new vehicle can be drastic and lead to a cycle of poor auto financing decisions,” Ivan Drury, Edmunds’ director of insights, says. “If you find yourself significantly underwater on your loan, your best opportunity to rise to the surface is to hold onto the vehicle while keeping up with payments and maintenance.”
In other words, stick with the car you have.
While you’ll likely have a hard time finding a freebie at a car lot, you can check out Edmunds’ tools to find out how much your car is worth — for free.