Archive · 15 Aug 2025
Understanding Upside-Down Car Loans and Their Implications
An upside-down car loan is when you owe more money on your car loan than your car is actually worth.
This is like owing $15,000 on a car that's only worth $12,000.
Many people have this problem.
It can happen if you overpaid for your car, didn't put any money down, or are taking too long to pay it off.
If you want to trade your car in or if it gets wrecked, you might have to pay extra money out of your own pocket to cover the difference.
An upside-down car loan means owing more on the loan than the vehicle's worth.
26.6% of vehicle trade-ins had negative equity, a four-year high, as of late July.
The average amount owed on upside-down loans was $6,754 in the second quarter of the year.
Causes include overpaying for a car, financing with no money down, or long repayment terms.
Being upside down can be problematic if you trade in your car or it's totaled.
- Who
- Many Americans
- What
- An upside-down car loan means owing more on a car loan than the vehicle's worth.
- When
- Data from late July revealed a rise in upside-down car loans.
- Where
- N/A
- Why
- This can result from overpaying for a car, no down payments, or long repayment terms.
Borrower
Lender
Financial Risk
Borrower
Potentially owe money to lender if vehicle is totaled.
Lender
N/A
- Definition
- Loan balance exceeds vehicle's value
- Negative Equity in Trade-Ins (Late July)
- 26.6%
- Average Amount of Upside-Down Loans (Q2)
- $6,754
- Possible causes
- Overpaying, no down payment, long terms
- Potential problems
- Trade-ins, totaled vehicles