In 2024, 1.73 million vehicles were repossessed by lending institutions due to non-payment—a staggering 43% increase from 2022. And that number is expected to rise.Many of the vehicles purchased during the pandemic reached record transaction prices, with 82% of buyers in January 2022 paying over the Manufacturer Suggested Retail Price (MSRP). As used car prices have since dropped from those highs, negative equity in vehicle loans has surged. In short, more vehicle owners are now “upside down”—owing more on their car than it’s worth.If a vehicle owner’s financial situation changes, selling the car won’t likely cover the loan. The average amount of negative equity being rolled into new loans is now $6,838, with one in four trade-ins carrying over $10,000 in negative equity.All of these factors have pushed total U.S. auto loan debt to over $1.7 trillion, a record high.The average monthly payment for a new car is now $741, while used car payments average $521. Loan terms are getting longer, too. As of early 2025, the average new car loan lasts 68.6 months, slightly longer than the average 67.2 months for used cars, according to Experian.With affordability stretched thin, many buyers are turning to extended loan terms to lower their monthly payments. In Q1 2025, 19.8% of new-vehicle financing involved 84-month loans—a record high, and up from 15.8% the previous year, according to Edmunds.Compounding this issue are auto tariffs introduced by the current administration, which have pushed average new car prices close to $50,000. When new vehicle prices rise, used car prices typically follow. That’s good news for collision repairers, as higher used car values raise the threshold for repair versus total loss calculations.However, the record number of repossessed vehicles—most of which are sold at auction for low prices—creates downward pressure on used car values, potentially offsetting those gains.Then there’s the customer who bought in 2022 and paid over MSRP, or who rolled thousands in negative equity into a new loan. That customer will be difficult to satisfy if their vehicle is declared a total loss. For insurers, dissatisfaction with a total loss settlement is one of the most common reasons a policyholder switches carriers.And the worst of it may still be ahead.The “negative equity bubble” created by pandemic-era car purchases is only about three years old. Many of those loans won’t be fully paid off. Instead, new car fever will hit again—and a significant number of consumers will roll that negative equity into yet another loan, kicking the debt further down the road.
