What to do if you're underwater on your car loan

Core Insights - More than 26% of new-vehicle trade-ins in Q2 2025 had negative equity, the highest share in over four years [1] - The average amount owed on upside-down loans is $6,754, indicating increasing risks associated with car debt [2] - Affordability pressures from high vehicle prices and interest rates are exacerbating the negative equity situation [3] Financial Implications - Consumers with negative equity who rolled it into a new vehicle loan paid an average of $915 per month, significantly higher than the industry average of $756 [5] - These consumers financed $12,145 more than typical new-vehicle buyers, highlighting the financial strain [5] Strategies to Mitigate Negative Equity - Keeping the current vehicle longer can help avoid deeper financial issues, as making payments reduces the loan balance while vehicle depreciation stabilizes [4] - Refinancing may alleviate some negative equity impacts if credit has improved or interest rates have decreased [6] - Leasing a new vehicle can be an alternative, but it requires managing higher monthly payments due to existing negative equity [7]