JD Power Report: 30% of U.S. Car Buyers 'Underwater' on Trade-Ins as Negative Equity Rises

Nearly one-third of American car buyers are trading in vehicles worth less than the loan balance they carry, a financial trap that is tightening its grip on the auto market. New data from JD Power reveals that 30.5% of consumers who traded in a vehicle in March carried negative equity, a significant jump of 4.2 percentage points from the same period last year. This trend has been climbing steadily since 2022, signaling a deepening debt burden for a substantial segment of car owners.

The core of the problem stems from purchases made during the peak of pandemic-era inventory shortages four years ago. Buyers who financed vehicles at inflated prices are now returning to the market, only to find their current cars are worth less than what they still owe. This negative equity is then often rolled into new, larger loans, compounding the debt. Despite high transaction prices persisting, total consumer spending on new vehicles is projected to fall sharply, with March spending estimated at $49.4 billion—a 13.9% decline year-over-year.

The rising tide of auto debt presents a systemic challenge, creating pressure on household budgets and exposing lenders to greater risk. As more consumers find themselves underwater, their financial flexibility shrinks, potentially cooling the broader auto market and putting strain on dealership financing operations. This cycle of rolling over debt threatens to lock a growing number of buyers into a costly and restrictive financial position for years to come.