Car Trade-Ins See Rising Negative Equity, Especially for EVs in Q4 2024

A concerning trend indicates a rise in negative equity in car trade-ins, particularly affecting electric vehicle (EV) owners. In Q4 2024, Edmunds reported that 24.9% of new car trade-ins had negative equity, an increase from 20.4% in Q4 2023. The average amount owed on these upside-down loans reached a record high of $6,838. EV owners are particularly vulnerable, with 54% being underwater in Q4 2024, compared to 46% in the previous quarter. This is largely due to the rapid depreciation of EVs. High monthly payments, averaging $742 for new and $525 for used cars in Q4 2024, further strain budgets. This trend underscores the financial challenges of car ownership, especially with EVs, and the risks associated with trading in vehicles before loans are fully paid off. Consumers with negative equity face significantly higher monthly payments, averaging an additional $159, and finance approximately $12,388 more than the average for all new vehicles. Longer loan terms also contribute to negative equity, with owners having 84-month loans being approximately $5,000 underwater on average.