Tips for buying a new car
Buying a new car can be a daunting task. Here’s everything you need to know before heading to the dealership.
- Nearly 30% of new car buyers in late 2025 were behind on their trade-in loans.
- The average amount owed on these trade-ins reached an all-time high of $7,214.
- The trend is related to loans taken during high car prices and the pandemic-era car shortage.
Nearly 30% of recent new car buyers are behind on their trade-in loan, according to new data released Thursday, Jan. 15 by Edmunds.com.
The group said 29.3% of trade-in values used to buy new cars were underwater in the fourth quarter of 2025, meaning owners owed more on their existing cars than they were worth at the time of trade-in. Mr Edmunds said the figure represented the highest share of underwater car buyers recorded by the company since the first quarter of 2021, when the group announced that 31.9% of trade-ins had negative trade-in capital.
The discovery comes as the average price of a new car exceeds $50,000, according to Kelley Blue Book.
How much do car buyers pay on average for a trade-in?
Edmunds said car buyers owed an average of $7,214 on trade-ins in the fourth quarter of 2025, the highest level ever recorded by the group.
The group attributed the increase in negative trade-in equity to higher new car prices and long-term loans during the COVID-19 pandemic, as well as a lack of transactions during that time.
“Many of today’s underwater trade-ins involve loans originated during the pandemic-era chip shortage, when new car inventory was scarce and incentives were minimal,” Edmunds said. “With fewer discounts available, many buyers paid near or above MSRP, often with less flexibility to select lower-priced models and trims.”
On average, how much did car buyers owe on trade-ins in the past quarter?
Edmunds said car buyers will owe an average of $6,905 in the third quarter of 2025. Here’s how car buyers who traded in their cars have fared over the past two years.
- Q4 2025 | $7,214
- Q3 2025 | $6,905
- Q2 2025 | $6,754
- Q1 2025 | $6,880
- Q4 2024 | $6,838
- Q3 2024 | $6,458
- Q2 2024 | $6,255
- Q1 2024 | $6,167
What are the downsides of being behind on your car loan?
Edmunds said the firm’s data “highlights how negative equity tends to become a cycle that is difficult to break out of.”
“While debt rollovers may provide short-term relief, they often leave buyers with higher payments and fewer options the next time they enter the market,” the group said.
Edmunds offered the following tips to avoid that cycle.
- Understand how much your vehicle is worth relative to the amount you owe
- Choose purchases that maintain value and meet long-term needs
- Recognize that focusing only on monthly payments can obscure the true cost of your purchase
Why are car loans becoming longer and more expensive?
According to Lending Tree’s latest poll, nearly 50% of new car buyers choose a loan term of 72 months or longer.
According to the poll, 47.5% of Americans with auto loans have terms of 72 months or more, and 7.6% of them have terms of 84 months or more.
The poll found that Generation X borrowers, or those born between 1965 and 1980, currently take out the longest-term car loans. Of these, 53% have a period of 72 months or more, and 7.7% have a period of 84 months or more.
Gen X car loan borrowers also have the highest monthly car payments and are most likely to have a car payment of more than $1,000. According to the poll, the average monthly payment for Gen X is $594.
