Ester Horowitz, a CarJoy auto broker based out of Carle Place, has seen an uptick in Long Islanders seeking leases in recent years.
There’s strategic reasons for that, she said, one being that a temporary lease protects the driver from falling into negative equity as the car’s value drops.
That’s a concern for more Americans as, around the country, around 3 in 10 drivers trading in a vehicle owe more on their auto loan than the car is worth, according to a recent report from online car-shopping resource Edmunds.
The average negative equity on a trade-in was $7,183 at the end of the first quarter of 2026, according to the report, calling it “the second highest quarter on record.”
Is that you? Or are you worried it could be you? Here’s what experts had to say.
Why are more Americans upside down on their car loans?
The number of Americans trading in underwater vehicles has been on the rise since 2022, as more people trade in cars valued less than they were bought for during a pandemic-era shortage, the Edmunds report said.
That means more people have auto loans that exceed “the value of the car,” said Indira Khan, chief transformation officer at Suffolk Credit Union, headquartered in Medford.
“Affordability is a major concern” in the auto industry right now, said Tom Libby, auto analyst at S&P Global. “Prices are going up, and so it’s hard to stay in the same vehicle you had before at the same price.”
The average price point for new vehicles is around $50,000, a significant increase from a few years ago, said Casey Mauldin, chief revenue officer and chief lending officer at Westbury-based Jovia Financial Credit Union.
Jovia is seeing more leases than a year ago, an indicator that “people don’t really want to sacrifice the quality of the vehicle” for the sake of owning it themselves, Mauldin said.
Although there are caveats, it might be cheaper to lease, he added.
How do I avoid falling into negative equity?
It’s important to be realistic about your financial resources to avoid falling into negative equity in the first place, Libby said.
“What you want to avoid is going right up to the edge, and the problem is that the salespeople and the finance managers, they’re going to want to move you up. You need to resist that and stay within your financial means,” he said.
One way to do that is to hang onto your car if you can, he said. Another is to shop for pre-owned vehicles.
Once a consumer “drives a new vehicle off a lot, they depreciate a lot,” he said. “If you get a vehicle that’s 2 or 3 years old, the price is going to be much lower.”
Shoppers can also downsize the car they’re looking for without worrying about a decline in quality, he said: “There’s no such thing as a bad vehicle anymore.”
Also, pay attention to what you’re buying and what your loan terms are, Khan said. “The best way to purchase a vehicle is to come into your credit union and get pre-approved before you go to the dealership.”
Suffolk Credit Union offers online calculators for auto loans and auto refinancing to help with the research process.
Gap insurance can also provide a safety net against negative equity in the event of an accident, Mauldin said, by covering the difference between an outstanding loan balance versus what auto insurance is willing to pay for the incident.
If you’re shopping for a car, you can check your car’s estimated value online through resources like the Kelley Blue Book, Mauldin said, although it’s important to note that a history of accidents could lower the vehicle’s worth.
Keep your credit clean for better loan terms, he added, and avoid unnecessary add-ons that could drive up the cost of the car.
What do I do if I already have negative equity?
The best way to get out of an upside down loan is to pay off your principal, experts said.
But “the problem is a lot of people nowadays don’t have that type of discretionary income,” Khan said.
Wait to buy a car if possible, Mauldin suggested. If you can’t, shop around to see if there are other vehicles that better fit your financial situation or consider a lease.
Libby pointed out that while there are very expensive vehicles out there, there’s also options under $35,000 that work well.
Avoid longer loans if possible, he added, noting that extended term lengths often come with higher interest rates.
Another option is to refinance your loan, Khan said. “When rates change, just like when mortgage rates go down … you can refinance an auto loan too.”
Do not roll your old loan into the new vehicle, experts said.
That puts you in a “more compromising position” and, if the cycle continues, risks becoming a situation that’s impossible to escape, Mauldin said.
Brianne Ledda covers personal finance and affordability for Newsday. She previously covered Southold and Greenport for The Suffolk Times and is a graduate of Stony Brook University.
