9 cars that leave owners with the highest average negative equity
If you have a car loan, trying to work an early trade-in might expose some ugly truths. Generally speaking, you can expect brand-new cars to lose about 20% of their value within the first 12 months. And it only goes down from there. Yusef Benallal is an independent car dealer operating out of Atlanta, Georgia. He’s handled thousands of vehicle transactions. His customers often want to trade their current ride for something listed on one of his two dealership lots. However, the numbers don’t always add up due to the very high negative equity the customer – sometimes unknowingly – carries on their current vehicle loan.
It happens so frequently that the car dealer started taking calls from the general public asking how to get out of their underwater car loans.
Negative equity results when a car loan balance exceeds the retail value of the vehicle. For example, say you drive a 2022 Nissan Armada. When it was new-from-factory in 2022, you paid $63,000 including fees, taxes, etc. You don’t have stellar credit, either, so signed for a fairly high interest rate. You also had a previous loan balance rolled over from a GMC Yukon you drove before switching to the Armada. Three years in with the Armada, though, your income unexpectedly changed, so you suddenly realize you need to move into a smaller, cheaper car with a much lower payment.
You head to a dealership and see what you can get on trade
Once you arrive, you let the staff know you’ve got a really nice 2022 Armada with 26,000 miles on it. Pretty slick, huh?
You soon find out, though, that the SUV is now only worth $34,000…and its trade-in value is even lower to leave room for dealer resale profit. Due to your interest rate and the leftover balance you rolled over from the Yukon, you’re shocked to find out you still owe more than the Armada’s worth.
The dealership tells you that you can’t get approved to roll the current loan balance over to a deal on a smaller, more affordable vehicle since the newest lien would far exceed the car’s value. You’re stuck with the high car payment, and panic sets in.
Negative equity leaves you with slim options
Keep the car. Quickly fill the income gap with odd jobs and part-time work. Hint: this is why you might book an Uber and get picked up in a stunning Cadillac Escalade. Folks also rent their cars out on Turo to mitigate the payments (if the loan company allows that). Some people borrow money from family or friends to get back on track.
Sell it privately and take out a personal loan to repay the negative equity. Selling privately tends to net you more than a trade-in. This option requires a private buyer who understands they won’t get the title from you until you pay off the lender. You’d need to get approved for the loan balance first and be prepared to combine the buyer’s funds with your personal loan to pay off the car note. This still leaves you in debt, of course, but without vehicle depreciation as a contributing factor.
Turn negative equity into a lease. Some dealerships offer generous lease deals that will incorporate your negative equity. You wouldn’t need to worry about additional negative equity forming during your lease since you’ll return the new car at the end of the contract term. Make sure you understand a lease agreement in its entirety before signing.
Let the bank repo the SUV and face a big hit to your credit profile. You’d probably still need a reliable car, though, so you might need to buy a quick cash car and work to rebuild your personal finances.
Since Benallal sees this exact situation over and over, he shared a list of cars he associates with high negative equity
Jeep Grand Wagoneer
Benallal says these full-size SUVs regularly force $30,000-$50,000 in negative equity on their owners.
Kia Telluride and Hyundai Palisade
Drivers can expect $20K-$35K in negative equity if they attempt a trade-in.
Hummer EV
The car dealer says he’s calculated $70K-$120K negative equity situations with Hummer EV owners.
Ferrari SF90
When folks buy a Ferrari SF90 brand new, they were nearly immediately $200K-$300K underwater, the car dealer claims. “And no, I didn’t stutter.”
Aston Martin DBX and DBX 707
50K-80K
Mercedes-AMG SL 63
One customer experienced $98,000 in negative equity after less than two years of ownership.
Range Rovers “always have a negative equity story behind them”
In his dealings, Range Rovers usually average $20K to $50K in negative equity.
Mercedes-Benz G Wagon
He sees loan balances range from $50K-$60K over the car’s market value.
Bottom line: New car depreciation is a b-word, folks.
Buying used could save drivers from crushing negative equity
Benallal says drivers wanting large SUVs, sports, or luxury cars also have to finance them, they should consider used models. This way, they dodge the largest waves of depreciation and can better avoid painful negative equity.
