Jul 30, 2025 - Business

Car buyers' auto debt is snowballing, Edmunds says

Joann Muller

illustration of a sedan with a license plate styled to look like a chip credit card — Illustration: Tiffany Herring/Axios

A growing share of car owners find themselves underwater on their auto loans, and they are dragging that debt into their next vehicle purchase, according to new data from the car-shopping site Edmunds.com.

Why it matters: High car prices and steep loan rates have combined to create an affordability crisis for U.S. car buyers already under broad financial stress.

When car buyers roll up debt owed on their trade-in into the purchase of their next vehicle, they can really get into trouble.

By the numbers: More than 1 in 4 new vehicle trade-ins are underwater, a four-year high, according to Edmunds' Q2 data.

Americans with upside-down car loans owe an average of $6,754, Edmunds found.
Nearly one-third of car owners stuck with negative equity between $5,000 to $10,000 on their trade-in carried that debt into their next car loan.
The average monthly payment for buyers who rolled negative equity into a new loan climbed to $915 in the second quarter, compared to $756 a month for the overall industry.

Reality check: Potential tax deductions for new car purchases won't offset the thousands more consumers will pay in interest by trading in a car with negative equity, Ivan Drury, Edmunds' director of insights, said in a press release.

The bottom line: Car owners are at risk of getting stuck in a cycle of debt they can't escape.

Add Axios on Google

Car buyers' auto debt is snowballing, Edmunds says

What to read next