Get access to the same vehicle valuation tool that dealers rely on. With Black Book, you’ll have insider data to accurately assess trade-in and purchase values—empowering you to negotiate the best possible deal.
Negative equity, or being “underwater” on a car loan, is becoming a growing issue for many drivers in today’s market. As vehicle prices soar and depreciation accelerates, more car owners are finding themselves owing more on their loans than their cars are worth. CarEdge, in partnership with Black Book, surveyed nearly 1,000 drivers to understand the extent of this problem in Q3 2024. Here are the key findings.
According to our survey, 31% of drivers who financed their vehicles are currently in negative equity. This number rises to 39% for vehicles purchased since 2022, indicating that newer car buyers are especially vulnerable. As vehicle prices increase and long loan terms become more common, the risk of being underwater is higher than ever.
Most Drivers Overestimate Their Vehicle’s Value
A staggering 61% of surveyed drivers overestimate how much their cars are worth, with 17% believing their vehicle is worth at least $5,000 more than its true trade-in value. This disconnect can lead to unpleasant surprises when drivers try to trade in or sell their cars, often rolling over negative equity into their next auto loan and perpetuating the cycle.
Longer Loan Terms Lead to Greater Negative Equity
Our data shows that loan terms directly impact vehicle equity. Car owners with 84-month loan terms are nearly $5,000 underwater on average, while those with 36-month loans typically have $12,340 in equity. Although longer loans reduce monthly payments, they also increase the likelihood of negative equity in the long term.
EV and Luxury Car Owners Are Hit Hardest
Electric vehicle owners are significantly more likely to be underwater. Of the EV owners we surveyed, 46% are currently in negative equity, with a median loan-to-value (LTV) ratio of 0.94—higher than the broader market’s 0.73. Luxury car brands like Tesla and BMW also see higher rates of negative equity compared to budget brands like Toyota and Honda.
A Concerning Trend for 2025
As more drivers find themselves underwater on their car loans, the negative equity issue is poised to become a major challenge for car owners and the auto industry alike. While budget car buyers may fare better, EV and luxury car owners are disproportionately affected.
CarEdge remains committed to providing insights and tools to help consumers navigate today’s car market. To learn more about vehicle equity and stay informed on auto news and market trends, visit CarEdge for expert analysis and guidance. For more information about Black Book’s industry-leading data and analytics, visit BlackBook.com.
As 2025 approaches, some car shoppers are finally seeing relief after years of price hikes. Several popular cars and trucks are getting price cuts in the new year. With automakers competing for U.S. market share and adapting to market demands, a few fan-favorites are over a thousand dollars cheaper for the new model year. Here’s a look at four crossovers and one popular pickup truck that are all receiving price cuts for 2025.
The 2025 model year is the last call for the Ford Escape. After two decades in the Ford lineup, the Escape will be discontinued to make way for EVs. As interest in the doomed crossover wanes, Ford has announced lower pricing for the 2025 model year. The popular Escape ST-Line is $1,500 cheaper for 2025.
When it comes to 2025 Ford Explorer pricing, trim options matter. Although the Explorer’s base MSRP increases by nearly $3,000, the more popular Explorer ST-Line gets $1,400 cheaper for 2025. Don’t pay a dollar over MSRP for this SUV!
Mazda sold over 70,000 CX-5s through the first half of 2024, but that’s not keeping them from launching an all-out price war with the crossover competition. For 2025, the Mazda CX-5 Premium Plus gets $1,300 cheaper.
Finally, more than a year after the Blazer EV arrived as a 2024 model, sales are starting to pick up. With a stop-sale for software issues well behind us, more drivers are scoring great deals on the sporty electric crossover. For the 2025 Blazer EV, GM is aiming to boost sales with a starting price that’s $1,200 lower.
The GMC Sierra 1500 is the only truck with falling prices for 2025. Even so, it’s hardly a discount. The popular AT4 spec is $300 cheaper for 2025. Not all trim options are seeing price cuts, but it’s worth mentioning due to rising prices for most of the full-size truck competition. However, seasoned truck buyers know that big cash and financing discounts are likely to arrive later in 2025 for those with patience.
With automakers slashing prices on some of the most popular models, 2025 is shaping up to be a better year for car shoppers. We recently shared our 2025 car market forecast, and we’d be shocked if more price cuts weren’t announced soon. Be sure to stay informed and explore the latest car offers with CarEdge, where you can find the best deals on these models near you.
If you’re looking for ways to save money on your car loan, refinancing could be the perfect solution. Refinancing your loan can lower your monthly payments and reduce the amount of interest you’ll pay over time. This simple guide will walk you through the steps to refinance your car loan and help you decide if it’s the right move for you.
How to Refinance Your Car Loan
Step One: Review Your Current Loan Terms
Before refinancing, it’s important to understand your current loan. Take a close look at your loan details, including the 1) remaining balance, 2) interest rate (APR), and 3) monthly payment.
You also want to check if your current loan has a prepayment penalty. Some lenders charge a fee if you pay off your loan early, which could impact whether refinancing saves you money. If you don’t see a prepayment penalty mentioned on your online banking portal, you may need to give your lender a call to find out.
Step Two: Review Your Financial Picture
To get a better auto loan rate, you’ll first want to check your FICO credit score for improvement. It’s best to check your credit score for free with the three major credit bureaus: Experian, TransUnion, and Equifax. It’s normal to see slight differences between your three major credit scores. To qualify for a better rate, you’ll need an improved credit score, and in most cases, proof of income. Once you’ve reviewed your credit score and overall financial picture, you’re ready to shop for rates.
Step Three: Shop For Better Rates
Refinancing is all about finding better terms. It’s smart to compare rates from multiple lenders, including banks, and credit unions. Even if you’ve always used one particular bank, you’ll want to review offers from other lenders.
Keep in mind that different lenders may offer different terms, and the lowest interest rate isn’t always the best option. Look at the full loan package, including fees and repayment terms, to find the best deal for your financial situation. It’s also smart to see how much a better rate will save you using a free refinancing calculator.
Step Four: Apply For A Refinancing Loan
Once you’ve found the best refinancing offer, it’s time to apply for refinancing. Be ready to provide documentation such as your current loan details (including bank and account or loan number), proof of income, and information about your vehicle (VIN number, make, model, year, and mileage). Most lenders offer online applications, making the process quick and easy.
Step Five: Finalize Your Loan, And Rake In The Savings!
After your application is approved, your new lender will pay off your old loan, and your refinanced loan will take its place. From here, you’ll start making payments to your new lender at the lower rate. Be sure to set up auto-pay to ensure you never miss a payment on your new loan.
By refinancing, you’ll save money on interest and potentially lower your monthly payments, giving you more room in your budget. The process is simple, and the benefits can be huge over the long run.
Seasonality plays a big role in the auto market. New car shoppers are familiar with the windows of opportunity for savings: year-end car sales, Memorial Day deals, and Summer truck month, to name a few. But for used car buyers, the question remains: when is the absolute best time to buy a used car? Thankfully, there’s good news for those looking to buy a pre-owned vehicle. The optimal time to buy is right around the corner. Understanding seasonal shifts can help you save big on your next purchase.
Less Demand Equals Better Deals
The key to finding the best deals on a used car lies in identifying when demand is lowest. According to CarEdge’s Ray Shefska, the slowest period for used car sales typically runs from mid-December through the end of January. This predictable dip in demand happens for two main reasons. First, year-end promotions and zero-percent financing deals on new cars lure many would-be used car buyers into the new car market. For buyers with solid credit, it makes more sense to take advantage of these new car offers. As more drivers shop new cars, the demand for used cars softens.
Second, tax season plays a major role. Starting in late February and running through spring, millions of taxpayers receive their refund checks. With money in hand, the demand for used cars increases. With higher demand comes higher prices, and less negotiability. If you’re in the market for a used car, December and January are the best months to make your move.
What Does The Data Say?
Supporting this trend, wholesale price data from Black Book shows a consistent drop in used car prices every December—when the market isn’t skewed by unusual factors like the pandemic. As shown above, the car market shortages of 2021 were the exception to the rule. Furthermore, used car inventory typically climbs towards the end of each year as demand slows. This seasonality is clear in the graph below.
As the used car market stabilizes after years of disruption, shoppers can expect this seasonal pattern to play out in 2024 and 2025. That means the coming months are likely to offer some of the best deals in the market. With used car values falling, dealerships are more inclined to negotiate, or better yet, lower sticker prices.
The best time to buy a used car is right around the corner. If you’re looking for a deal, December and January are your best bet. These months are your chance to score lower prices before the tax season spike. Be sure to check out CarEdge Insights for unmatched market data for every make and model. With Insights, DIY car buyers have leverage in every negotiation!
For the first time in four years, the Federal Reserve is officially dropping interest rates. On September 18, the Fed announced a 0.5 percentage point reduction in its benchmark rate. The rate cut is expected to be the first of several, and it comes at a time when the benchmark rate sits at the highest level since 2007. For car shoppers, falling interest rates point towards an improving buyer’s market ahead. But what about those who already bought a car? Who should be looking to refinance their auto loan now that interest rates are falling? Here’s how the math plays out for borrowers.
Who Should Refinance Their Auto Loan Right Now?
For borrowers who have seen a big improvement in their credit scores since taking out their auto loan, refinancing now makes sense. With September 2024’s 50 basis point (0.5%) cut in the Federal Reserve’s benchmark interest rate, those with better credit can secure more favorable loan terms and start saving right away. If your credit score has improved by 50 points or more, refinancing now makes sense. Refinancing allows you to lock in a better rate and lower your monthly payments, in addition to reducing the total interest paid over the life of your loan.
For example, let’s say you have a $25,000 loan at 10% APR over a 60-month term. Since taking out the loan, you’ve improved your credit score from 650 to 700, and your debt-to-income ratio is looking better. Refinancing that loan today at 6.5% APR would save you around $2,300 in total interest over 60 months. While future rate cuts may offer even more savings, refinancing now allows you to start seeing financial benefits immediately.
Who Should Wait To Refinance?
For others who haven’t seen a major improvement in their credit score yet, it makes more sense to wait for additional rate cuts while continuing to work on improving credit. Some economists predict that the Federal Reserve could lower rates by another 1.5-2.5% from late 2024 through 2025, offering even better opportunities to save by refinancing.
In the meantime, focus on improving your credit score and debt-to-income ratio. This will ensure that when the rates drop further, you’ll qualify for the most competitive offers. Paying bills on time, reducing debt, and maintaining a low credit utilization ratio are all steps that can boost your credit score and position you for better refinancing terms when the time is right.
More Rate Cuts To Come
The Federal Reserve is highly likely to lower rates yet again on November 7, 2024. Additional rate cuts will follow in December and 2025. In other words, auto loan rates will fall further in the months ahead. So, what should you do with your current car loan? The best decision depends largely on your current credit situation. If your credit score has improved since you first took out your loan, refinancing now could offer immediate savings, especially with today’s lower rates.
However, if your credit score hasn’t improved much, waiting might be the smarter move. With the likelihood of additional cuts by the Fed, combined with a stronger credit score, you’re likely to secure even better refinancing terms and see greater savings. You can always calculate how much a lower interest rate would save you using a free calculator.
In either case, staying informed about rate trends and working on your credit score will ensure you’re in the best position to benefit from refinancing—whether you decide to act now or wait until 2025.
CarEdge Insights
