More Americans are underwater on car loans, owing more money than ever.

According to the car comparison site Edmunds, almost a quarter of Americans, or 24.2%, are upside down on their auto loans, meaning they owe more than the car is worth.

To make matters worse, the average amount owed is the highest ever at a mean cost of $6,458.

“Vehicle prices have gone up, so vehicles are just more expensive inherently,” explained Jessica Caldwell, Edmunds’ head of insights.

“What we saw just a few years ago, there was an inventory shortage, so people were paying above MSRP. When you do that, you obviously owe a lot more money and you start to have a longer loan term. A few years down the road, you decide you don’t want the vehicle, and now you go to sell it, and because you overpaid, you bought high, you’re selling at a much lower rate.”

Caldwell said the average cost for a new car is around $47,000 — which has been the standard price for around three years — and $28,000 for a used one, again reflecting a three-year mean.

Both numbers represent relatively high watermarks for vehicle costs. Higher interest rates are a factor in the prices, with the average for a new vehicle standing at 7.1% and 11.2% for a used car.

“We’re seeing Fed rate cuts, but it’s not necessarily going to make a massive impact,” Caldwell said. “Continuation of the cuts from the Fed, I think that’s definitely going to help, especially if you’re someone who’s getting a rate like 6% because a half a point or a whole point is going to make a big difference.”

Over one in five consumers with negative equity owes more than $10,000 on their auto loan.

“The number of people who are underwater in their loans is probably going to continue to get higher, just because it’s a function of how much prices have gone up,” she added.

To avoid the issue, experts suggest keeping a car as long as possible, at least for the entirety of the loan. They also recommend trying to get the shortest term available and nothing longer than six years.

Have a news tip? Contact Janae Bowens at jnbowens@sbgtv.com or at x.com/JanaeBowens.