A Negative Equity Nightmare Is Rocking The Used Car Market

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Buyers who paid over MSRP during the pandemic are most at risk as falling demand for new cars pushes used prices down

Remember those crazy days during the pandemic when dealers were so desperate for stock that some drivers were being offered more for their used cars than they paid for them, and buyers were happy to pay way over MSRP for new ones? Like masks and jabs, they’re a distant memory for most of us now, but some Americans are getting a nasty reminder at trade-in time. Edmunds says a growing number of drivers who bought cars when prices were high with loans are now finding themselves in negative equity.

The ATP for 2-year-old vehicles dropped to $32,583, a $3,294 decrease.The ATP for 10-year-old vehicles dropped to $12,447, a $1,304 decrease. Edmunds’ data reveals that one- and two-year-old vehicles are bearing the brunt of the downturn, the average transaction price for one-year-old cars dropping from their Q3 2022 peak by $6,763 in Q4 2023 to $38,720. That compares with a $3,294 drop in the same quarter for two-year-old cars and a $1,304 decrease for 10-year-old vehicles.

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