Roll $5,000 of negative equity into a $36,000 car loan at 7.7% for 72 months and you stay upside down until about month 43, three and a half years in, if the car loses 20% of its value in year one and 15% a year after that. Stretch the same loan to 84 months and the date moves to month 57. On a 60- to 84-month loan, each extra $2,500 you roll in adds two to seven months, but the loan term moves the date far more: the same car with nothing rolled in is still underwater until month 33 on a 72-month loan.
The habit is common. In the Consumer Financial Protection Bureau's auto finance data pilot, 2,500,077 of the loans originated from 2018 to 2022, or 11.7%, carried negative equity from a previous vehicle. Those loans averaged a 73-month term and a loan-to-value ratio of 119.3%, so the typical borrower owed about $1.19 for every dollar the car was worth on the day they signed.
What the CFPB found when it opened lender files
In February 2023 the CFPB ordered nine lenders (three banks, three finance companies and three captive lenders owned by carmakers) to hand over loan-level data. The June 2024 report Negative Equity in Auto Lending is the first study from that collection. It covers about 21.4 million purchase loans originated from 2018 to 2022, after refinances were removed. Credit unions and buy-here-pay-here dealers were not part of the collection, so the figures describe banks, captives and finance companies, not the whole market.
The report splits loans into three groups: no trade-in, a trade-in with positive equity, and a trade-in with negative equity rolled into the new loan. All figures below are averages from the report's Table 2 unless noted.
| Measure | No trade-in | Positive equity trade-in | Negative equity rolled in |
|---|---|---|---|
| Share of 2018 to 2022 originations (Table 1) | 56.2% | 32.1% | 11.7% |
| Vehicle price | $28,664 | $35,461 | $32,316 |
| Amount financed | $26,767 | $28,244 | $36,805 |
| Total down payment, % of price | 15.9% | 25.5% | 0.2% |
| Cash down payment, % of price | 15.5% | 10.1% | 7.7% |
| Monthly payment | $493 | $496 | $626 |
| Contract rate | 8.0% | 6.1% | 7.7% |
| Loan term | 67 months | 68 months | 73 months |
| Loan-to-value ratio | 101.7% | 89.1% | 119.3% |
| Payment-to-income ratio | 8.2% | 7.7% | 9.8% |
| Credit score | 732 | 752 | 704 |
| New-car loans assigned to repossession within two years (Figure 5) | 3.0% | 1.3% | 4.3% |
Four details in that table matter for anyone planning a rollover.
The down payment almost vanishes. Negative-equity borrowers put 7.7% of the price down in cash on average, but the old loan's shortfall ate nearly all of it, leaving a total down payment of 0.2%. Cash you hand the dealer goes first toward the old car, not the new one.
The loan is bigger than the car. The average amount financed ($36,805) was $4,489 more than the average vehicle price ($32,316). The report's executive summary gives $32,316 as the "amount financed" for this group, but its own Table 2 shows that figure is the vehicle price; the table is the figure to rely on.
Loan-to-value has a precise meaning here. The CFPB's data order defines loan-to-value as the amount financed divided by the value of the vehicle at origination. For negative-equity loans the 25th percentile was 107.7%, the median 119.6% and the 75th percentile 131.0% (Table 3). So three out of four borrowers who rolled over a balance started above 107.7%. Among positive-equity trade-ins, three out of four started below 108.1%.
The repossession gap is real but needs its wording. Figure 5 shows 4.3% of new-car loans with rolled-in negative equity were assigned to repossession within two years, against 3.0% with no trade-in and 1.3% with a positive trade-in. The CFPB describes this as "more than twice as likely" as positive-equity borrowers and "almost 1.5 times" as likely as no-trade-in borrowers; the bar heights work out to about 3.3 times and 1.4 times. "Assigned to repossession" means the lender started the recovery process, not that every car was taken.
The share itself moved a lot from year to year: 11.8% in 2018, 13.3% in 2019, 17.2% in 2020, 10.9% in 2021 and 7.9% in 2022, as used-car prices rose and then fell. The report's executive summary rounds the five-year share to 11.6% and its section 3.2 text to 12%; Table 1, which carries the loan counts, gives 11.7%. The CFPB also cites an Edmunds figure that 20% of vehicles traded in during the fourth quarter of 2023 had negative equity, a rise from early 2022. The mean shortfall rolled in was $5,073 on new-car loans and $3,284 on used-car loans.
Months until you are no longer upside down
The CFPB report measures where borrowers start. It does not say how long they stay underwater, and that timeline depends on two lines crossing: the loan balance falling under the amortization schedule, and the car's value falling with depreciation. The table below runs both lines month by month.
Inputs for every cell: a $36,000 vehicle financed at 7.7% (the CFPB average contract rate for negative-equity loans), no down payment, tax and fees paid in cash so the loan starts at exactly the price, and the shortfall added on top. The vehicle is assumed to lose 20% of its value in the first 12 months and 15% a year after that, spread evenly by month. That depreciation path is a stated assumption, not a measured fact for any model of car; the sensitivity section below shows what happens if your car holds value better or worse.
Each cell is the month from which the loan balance stays at or below the car's value for the rest of the loan.
| Shortfall rolled in | Amount financed as % of price | 48 months | 60 months | 72 months | 84 months |
|---|---|---|---|---|---|
| $0 | 100.0% | month 4 | month 19 | month 33 | month 49 |
| $2,500 | 106.9% | month 16 | month 26 | month 39 | month 54 |
| $5,000 | 113.9% | month 20 | month 30 | month 43 | month 57 |
| $7,500 | 120.8% | month 23 | month 33 | month 46 | month 60 |
| $10,000 | 127.8% | month 25 | month 36 | month 49 | month 62 |
A $7,500 rollover on a $36,000 car lands at 120.8% of the price, close to the CFPB median of 119.6%. On the 73-month average term that the report found, a borrower near the median is upside down for roughly the first four years.
The percentage column divides by the purchase price because the price is the only value most buyers know on signing day. The CFPB ratio divides by the lender's vehicle value, which can differ from the price, so treat the two as close cousins rather than the same number.
The monthly payments behind those rows:
| Shortfall rolled in | 48 months | 60 months | 72 months | 84 months |
|---|---|---|---|---|
| $0 | $873.80 | $724.79 | $625.94 | $555.74 |
| $2,500 | $934.49 | $775.13 | $669.40 | $594.33 |
| $5,000 | $995.17 | $825.46 | $712.87 | $632.92 |
| $7,500 | $1,055.85 | $875.79 | $756.34 | $671.52 |
| $10,000 | $1,116.53 | $926.12 | $799.81 | $710.11 |
This is the trap in one grid. A buyer who wants to keep the payment near $630 with $5,000 rolled in has to choose 84 months, and that choice pushes the crossing point from month 43 to month 57. The payment looks like a no-shortfall 72-month loan; the timeline looks nothing like it.
The term moves the date more than the shortfall does
Read down any column and the shortfall adds time slowly. Read across any row and the term adds it fast. With nothing rolled in, going from 48 to 84 months moves the crossing from month 4 to month 49. On a 72-month loan, rolling in $5,000 instead of nothing adds 10 months (month 33 to month 43).
The reason is the shape of amortization. In the first year of an 84-month loan at 7.7%, most of each payment is interest, so the balance barely moves, while the car loses its steepest slice of value. The gap between what you owe and what the car is worth therefore grows before it shrinks. Year by year, for $5,000 rolled into a $36,000 car:
| End of year | 72-month balance | 84-month balance | Assumed car value | Gap on 72 months | Gap on 84 months |
|---|---|---|---|---|---|
| 0 (signing) | $41,000 | $41,000 | $36,000 | $5,000 under | $5,000 under |
| 1 | $35,408 | $36,402 | $28,800 | $6,608 under | $7,602 under |
| 2 | $29,370 | $31,437 | $24,480 | $4,890 under | $6,957 under |
| 3 | $22,850 | $26,076 | $20,808 | $2,042 under | $5,268 under |
| 4 | $15,810 | $20,287 | $17,687 | $1,877 equity | $2,600 under |
| 5 | $8,208 | $14,037 | $15,034 | $6,826 equity | $997 equity |
| 6 | $0 | $7,288 | $12,779 | $12,779 equity | $5,491 equity |
| 7 | $0 | $10,862 | $10,862 equity |
On the 84-month loan the gap peaks at $7,602 at the end of year one, half again as deep as the $5,000 the buyer started with, and it is still $5,268 at the end of year three. That year-three figure is worth remembering, because year three is when many buyers start shopping again.
Shorter terms behave differently. On a 60-month loan with $5,000 rolled in, the deepest point, $5,381, comes in month 7, and the gap closes at month 30. On 48 months the balance falls faster than the car loses value from the first payment, so the gap only shrinks.
Financed sales tax and dealer fees work exactly like rolled-in negative equity in this math, because they add to the loan without adding to what the car would sell for. A buyer who finances $3,000 of tax and fees and also rolls in $2,500 starts the clock in the same place as the $5,000 row, near 113.9% of the price.
Interest you pay on a car you no longer drive
Money borrowed to clear the old loan is charged the new loan's rate for the new loan's whole term. Because every dollar of a fixed-rate amortizing loan carries the same share of interest, the cost of the shortfall alone is the shortfall times the loan's total-interest factor. At 7.7%:
| Shortfall rolled in | 48 months | 60 months | 72 months | 84 months |
|---|---|---|---|---|
| $2,500 | $412.68 | $519.97 | $629.68 | $741.81 |
| $5,000 | $825.36 | $1,039.94 | $1,259.36 | $1,483.61 |
| $7,500 | $1,238.04 | $1,559.91 | $1,889.05 | $2,225.42 |
| $10,000 | $1,650.73 | $2,079.87 | $2,518.73 | $2,967.22 |
Those figures assume you keep the loan to the end. On the 72-month loan, total interest is $9,067.42 with no shortfall and $10,326.78 with $5,000 rolled in; the $1,259.36 difference is the price of moving the old debt forward.
Applied to the CFPB averages, a $5,073 new-car shortfall financed for 73 months at 7.7% adds $87.25 to the monthly payment and $1,296.52 of interest. The $3,284 used-car average adds $56.48 a month and $839.30 of interest on the same terms.
The rate matters as much as the term. For $5,000 rolled into a 72-month loan, the interest on the shortfall alone is $632.27 at 4%, $1,259.36 at 7.7%, $2,038.07 at 12% and $3,210.80 at 18%. Higher rates also slow the balance, so the crossing month moves later:
| Rate | 48 months | 60 months | 72 months | 84 months |
|---|---|---|---|---|
| 4% | month 18 | month 28 | month 40 | month 53 |
| 7.7% | month 20 | month 30 | month 43 | month 57 |
| 12% | month 21 | month 33 | month 47 | month 61 |
| 18% | month 24 | month 37 | month 51 | month 66 |
The 18% row matters because the CFPB's appendix shows finance-company loans in the dataset averaged a 19.3% APR, against 8.1% for banks and 5.1% for captive lenders. A borrower with a $5,000 shortfall at a subprime rate on 84 months is underwater for five and a half years.
If the new loan qualifies for the temporary federal car loan interest deduction, the tax saving is worked through in the car loan interest deduction guide; a deduction lowers the after-tax cost of the interest but does not change the balance-versus-value timeline.
Depreciation is the soft number: a sensitivity check
Loan balances follow a formula. Car values do not. The CFPB report reproduces a Black Book and Fitch Ratings series on two- to six-year-old used vehicles: values fell between 8.3% (2011) and 17.3% (2016) a year from 2011 to 2019, fell only 2.0% in 2020, rose 28.7% in 2021, and were forecast to fall 18.0% in 2022. New cars, the report notes, drop sharply when the buyer takes ownership and the rate slows after the first two to three years.
That range is wide enough to change the answer, so the table below repeats the $0 and $5,000 rows under a faster path (25% in year one, 18% a year after) and a slower one (15% in year one, 12% a year after). All other inputs are unchanged: $36,000, 7.7%, nothing down.
| Depreciation path | Shortfall | 48 months | 60 months | 72 months | 84 months |
|---|---|---|---|---|---|
| Faster: 25%, then 18% a year | $0 | month 16 | month 29 | month 45 | month 61 |
| Faster: 25%, then 18% a year | $5,000 | month 24 | month 37 | month 51 | month 66 |
| Base: 20%, then 15% a year | $0 | month 4 | month 19 | month 33 | month 49 |
| Base: 20%, then 15% a year | $5,000 | month 20 | month 30 | month 43 | month 57 |
| Slower: 15%, then 12% a year | $0 | never underwater | never underwater | month 17 | month 31 |
| Slower: 15%, then 12% a year | $5,000 | month 15 | month 23 | month 34 | month 46 |
For a $5,000 shortfall on 72 months, the answer runs from month 34 to month 51 depending on the car. A model that holds value well cuts more than a year off; one that falls fast adds most of a year. The base path also ignores the day-one drop the CFPB describes, so for a brand-new car the first few months of every row are probably a little optimistic.
To use your own car, look up its trade-in value today and in a year (a dealer appraisal or a valuation guide), work out the percentage drop, and pick the row that matches best.
The second rollover is where the debt compounds
A buyer who rolls negative equity over once is set up to do it again, and the CFPB notes that financing a shortfall "could place the consumer in the same or worse negative equity position the next time they finance a vehicle." The table shows the gap left at the end of year three, the point when a buyer is most likely to trade again, for each starting shortfall:
| Shortfall rolled in | Gap at month 36, 60-month loan | Gap at month 36, 72-month loan | Gap at month 36, 84-month loan |
|---|---|---|---|
| $0 | $4,734 equity | $745 equity | $2,088 under |
| $2,500 | $3,618 equity | $649 under | $3,678 under |
| $5,000 | $2,501 equity | $2,042 under | $5,268 under |
| $7,500 | $1,385 equity | $3,435 under | $6,858 under |
| $10,000 | $269 equity | $4,828 under | $8,448 under |
On 84 months, a $5,000 shortfall turns into a $5,268 shortfall three years later, after 36 payments of $632.92. Rolling that into another $36,000 car on another 84-month loan starts the third loan at 114.6% of the price and keeps it underwater until month 58. The buyer has now paid interest on the first car's shortfall twice and is carrying it into a third loan.
The 60-month column shows the exit. Even a $10,000 shortfall on a 60-month loan is back to positive equity by month 36. A shorter term costs more each month, but it is the setting that keeps the next trade from starting in a hole.
Payment strain shows up in the CFPB data too
The CFPB's concern is not only that the loans are underwater but that several risk factors stack up on the same borrowers. Negative-equity borrowers had the highest payment-to-income ratio of the three groups (9.8% on average, 12.6% at the 75th percentile), the lowest average credit score (704), the lowest average monthly household income ($8,263) and the most frequent co-borrowers (34.0%). Their average payment of $626 was 27% higher than the no-trade-in average and 26% higher than the positive-trade-in average.
The connection to the timeline is practical. A borrower who is underwater cannot sell the car to escape the loan without writing a check for the gap. If income drops in month 20 of a 72-month loan with $5,000 rolled in, the shortfall at that point is still about $5,000 or more, and the realistic options are to keep paying, negotiate with the lender, or face a deficiency balance after repossession, which the CFPB defines as the amount still owed when the sale of a repossessed car does not cover the balance.
A total loss creates the same gap. If the car is destroyed while the loan is underwater, the insurance payout is based on the car's value, not the loan balance. Gap coverage exists for that case, and its costs and limits are an insurance question rather than loan math; the point here is only that the months in the timeline table are the months a payout would leave money owing.
Ways to shorten the underwater stretch
Each option below is run on the same $36,000 car at 7.7% with $5,000 of negative equity, so the effects can be compared directly.
Pay the shortfall in cash. This removes about $87 a month from a 72-month payment and $1,259.36 of interest, and moves the crossing point from month 43 back to month 33. The CFPB data show that negative-equity borrowers often had cash for the deal (7.7% of the price on average); it simply went to the old loan instead of the new car.
Choose a shorter term. Moving from 84 to 60 months raises the payment from $632.92 to $825.46 but brings positive equity forward from month 57 to month 30, and leaves $2,501 of equity at month 36 instead of a $5,268 shortfall.
Add a fixed extra payment to principal. Extra principal pulls the crossing point forward quickly because it compounds against the balance from the first month:
| Extra principal each month | Positive equity on 72 months | Positive equity on 84 months |
|---|---|---|
| $0 | month 43 | month 57 |
| $50 | month 37 | month 48 |
| $100 | month 31 | month 40 |
| $200 | month 24 | month 30 |
An extra $100 a month on the 84-month loan cuts 17 months off the underwater stretch. Check the contract or ask the lender how an extra payment is applied, and mark it for principal if the lender gives you that choice.
Keep the current car until the gap closes. Waiting often costs less than any rollover because the old loan's balance is already further down its amortization curve. Take a buyer who owes $20,000 at 6.5% with 36 months left (a $612.98 payment) on a car worth $15,000 today. If the car keeps losing 15% a year, the $5,000 gap closes in month 15. At 10% a year it closes in month 13; at 20% a year, month 18. Adding $100 a month brings it to month 12, and $200 a month to month 10. A year or so of patience replaces a shortfall that would otherwise be financed for six or seven more years.
Separate the numbers before signing. Ask for the payoff figure on the current loan, the trade-in allowance in writing, and the new car's price before any monthly payment is quoted. The CFPB's consumer guidance warns that rolling the balance over "will make your new auto loan more expensive," notes that the payoff amount can differ from the balance on your statement, and suggests waiting one week after the deal and then contacting the old lender to check that the previous loan has been paid off.
Checking a dealer's offer with the calculators
Three CalculatorVillage tools cover the pieces of this guide. The negative equity calculator shows what a shortfall adds to the payment and total interest. Its presets use a $36,000 car at 7.9% with a $10,000 trade against $15,000 owed, but they also include 13% sales tax (charged on the price minus the trade value) and $895 in fees, so the 72-month preset finances $45,275, or 125.8% of the price, at $791.61 a month. Under this guide's base depreciation path that loan reaches positive equity in month 48; with the shortfall paid off and the same tax and fees financed, it would be month 42. Set the tax rate and fees to zero to match the tables above.
The trade-in loan calculator is the better starting point when the trade has positive equity or when the sales-tax credit on a trade is the main question. Neither calculator draws a value curve, so for the crossing month, take the remaining balance at any month from the amortization calculator and compare it with your own value estimate for that date.
If the trade is still being decided, two other tools help: the 72-month auto loan calculator shows how a long term changes the interest bill, and the zero-down auto loan calculator shows how quickly a loan with nothing down falls behind the car. For a full affordability budget, including the term-length trade-offs in a Canadian context, see how much car you can afford in Canada. All auto tools are listed on the auto loan calculator hub, and the wider set of finance tools is on the finance calculators page.
The most useful single test before signing is the timeline table: find your shortfall and term, read across to the month, and ask whether you will still want this car on that date. If the honest answer is no, a shorter term, a cash payment toward the gap, or another year in the current car will cost less than carrying the old loan into a new one. The principal paydown calculator shows how much an extra monthly amount saves if you keep the loan you already have.
This guide is general arithmetic, not financial or legal advice. Loan terms, depreciation and lender practices vary; check your own contract and payoff figures.
Sources
Every CFPB figure here is quoted from the full June 2024 report as it stood on October 31, 2026. The balances, timelines and interest tables are CalculatorVillage's own amortization runs on the inputs stated above, done the same day.
- Consumer Financial Protection Bureau, Negative Equity in Auto Lending (June 2024): Table 1 originations and shares by year; Table 2 averages by trade-in group; Table 3 loan-to-value percentiles; Table 4 payment-to-income percentiles; Figure 5 repossession assignment within two years for new-car loans; section 3.3 mean negative equity of $5,073 (new) and $3,284 (used); Figure 4 depreciation series (Black Book and Fitch Ratings, as reproduced in the report); the Edmunds fourth-quarter 2023 trade-in figure as cited in the report; Appendix A dataset scope and exclusions; Appendix B definitions of loan-to-value ratio and deficiency balance; Appendix C Table 13 APR by lender type.
- Consumer Financial Protection Bureau, Negative Equity Findings from the Auto Finance Data Pilot (June 17, 2024): publication date, the nine market monitoring orders and the link to the full report.
- Consumer Financial Protection Bureau, Should I trade in my car if it is not paid off? (last reviewed September 12, 2023): rollover makes the new loan more expensive, payoff amount versus statement balance, and the one-week check with the old lender.