Why GAP is Important!!!

SANTA MONICA, Calif.—More Americans—one in four—are finding themselves upside down on their new car loans, according to Edmunds.

Q3 2025 data from Edmunds shows that a growing share of owners are trading in vehicles worth less than what they owe — and the debt they are rolling forward is only growing:

· More than one in four new vehicle trade-ins are underwater, a four-year high. 28.1% of trade-ins toward new-car purchases had negative equity, up from 26.6% in Q2 2025 and 24.2% in Q1 2025. “This is the highest share Edmunds has on record since Q1 2021, when 31.9% of new-car trade-ins were upside down,” the company said

· Americans with upside-down car loans owe more than ever. The average amount owed on upside-down loans hit a record $6,905 in Q3, edging past the previous high of $6,880 set in Q1 2025.

· Nearly one in three underwater car owners owe between $5,000 and $10,000 in debt — a new record high. 32.9% of negative-equity trade-ins fell into this range in Q3, up from 32.6% in Q2 and continuing a steady climb since last year

· A record share of underwater car loans are carrying five-figure debt. Nearly one in four (24.7%) trade-ins with negative equity carried more than $10,000 in debt in Q3, surpassing the previous high of 24.6% set in Q4 2024. Another 8.3% of trade-ins with negative equity carried more than $15,000 in debt, up from 7.7% in Q2 2025

Long-Term Consequences 

“The sheer amount of debt consumers are carrying in their trade-ins should be a wake-up call,” said Ivan Drury, Edmunds’ director of insights. “Nearly one in three upside-down car owners owe between $5,000 and $10,000 — and a growing share owe far more than that. Much of this stems from shoppers trading out of vehicles too quickly, or carrying loans taken out during the pandemic car market frenzy, when prices were at record highs. Those choices are now catching up, making it far harder to buy again without piling on even more debt.”  

Rolling Debt Drives Higher Monthly Payments

To highlight the financial effect of rolling negative equity into a new vehicle purchase, Edmunds analysts compared the costs for consumers who financed a new vehicle involving a trade-in with negative equity in Q3 against the industry average for all financed new vehicles. The average monthly payment for buyers who rolled negative equity into a new loan was $907 in Q3, down slightly from Q2’s high of $915 and $140 more than the overall industry average monthly payment of $767. They also financed $11,164 more than the typical new-vehicle buyer. 

Guaranteed Asset Protection (GAP)

GAP Example Graph:

* Deductible reimbursement is available in most, but not all states. Please consult your financing representative for the availability of this benefit.

Auto Advantage Program

Auto Deductible Reimbursement

This program is included for FREE with NHPCU GAP insurance.

• Pays up to five hundred dollars ($500) per Loss (UNLIMITED losses per year) when a Loss is filed and paid by the auto insurance company for a Covered Auto the Member owns or leases evidenced by the title, registration or loan document, AND insured under an Auto Insurance Policy designating the Member as the Named Insured.

• Loss means an event for which the auto insurance company has approved and paid a collision or comprehensive claim which exceeds the Auto Insurance Policy deductible for the Covered Auto.

• Coverage is effective upon date of enrollment and will continue for 3 year(s) depending on the benefit period provided.

If the Member suffers a Loss during the benefit period which is covered by the Member's Auto Insurance Policy, the Member may be entitled to reimbursement of the Auto Insurance Policy deductible amount up to $500 per Loss. To be eligible for reimbursement the Member must own or lease and insure the Covered Auto under an Auto Insurance Policy designating the Member as the Named Insured.

The GAP Advantage gives you further peace of mind. If the vehicle you are now purchasing ever becomes "totaled", or is stolen and not recovered, GAP Advantage pays an additional $1,000.00 toward the purchase of a replacement vehicle. Not only will you receive the difference between the value of your vehicle and its unpaid loan or lease balance, you also get a head start on financing a new or used replacement vehicle when you refinance through NH Postal Credit Union.

Please contact us for further details.