New Survey: 1 in 3 Drivers Are Underwater, Most Overestimate Their Car’s Value
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.
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One-Third of Drivers Have Negative Equity
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.
