Avoid Negative Equity & Lower Your Car Payment in Vermont — Why Buying Used Is Smarter in 2025-2026

If you're shopping for your next vehicle in Vermont, you've probably noticed something:  monthly payments seem higher than ever. Prices on new cars remain historically high,  interest rates are stubborn, and many buyers are unknowingly falling into a financial trap called negative equity - owing more on the loan than the vehicle is worth.

But here's the good news:
  ➡️ 2025-26 is shaping up to be the best time in years to buy a late-model used car, truck or SUV.
Let's break down what's happening - and how Vermonters can protect their wallets.

Negative equity simply means you owe more than the car is worth.

Example:
If your vehicle is worth $20,000 but you still owe $25,000 on the loan, you're  $5,000 underwater.

This happens when you combine one or more of these factors:

 
• You financed with little or no down payment
 
• You stretched the loan to 84 or maybe even longer like 96 months
 
• You traded in early before any equity was built up and rolled the negative equity into your new auto loan
 
• The vehicle depreciated faster than expected, perhaps because of a high number of miles accumulated, condition or other factors you can't control, like market demand.

In Vermont - where many buyers trade every 2-4 years and drive longer distances - negative equity has become extremely common with longer term loans.

According to Edmunds, over 26% of new-car trade-ins now involve negative equity.  Even more concerning, the average amount owed on those underwater loans is now  over $6,700.

In Q3 2025 Edmunds reported that the average negative equity hit a record $6,905.

This isn't a small number. This is the amount people are rolling into their next loan,  pushing payments higher and higher.

For many Vermont customers trying to keep payments manageable, it's become nearly impossible if they stay in the same new-car cycle they have.

Here's the most important insight for 2025:

Edmunds reports that 1-2-year-old vehicles are finally seeing sharper declines in value then - the first time since before the pandemic.

This is great news for Vermont buyers.

From 2021-2023, used cars were unusually expensive. In some cases, lightly used vehicles cost almost as much as brand-new ones. That made it tough to justify buying used.

But the market has shifted.
Normal depreciation is back - and that's giving used-car shoppers some of the best values in years.

🔹 This hurts new-car buyers

They're falling underwater faster, often within the first year of ownership.  They are staying underwater longer in their loans.

🔹 But it helps you

You can buy a late model used car, SUV or truck for:

 
• Thousands less than new
 
• Lower payments
 
• Lower taxes and insurance in many cases
 
• Far less risk of ending up underwater

This is the first time in several years that 1-2-year-old vehicles offer a clear, significant value for used-car buyers in Vermont.

If you want:

 
• Lower monthly payments
 
• A safer financial position
 
• The most car for your money
 
• Less risk of carrying thousands in negative equity

  … then a lightly used vehicle would be a good bet.

Here's why it works especially well here in Vermont:

✔ Lower sales tax

Buying used means you pay tax on a smaller amount.

✔ Lower insurance

Brand-new vehicles typically carry higher insurance premiums.

✔ Lower price = lower payment

This is the big one.

✔ Better value retention

The first owner absorbs that steep first-year drop in value - not you.

✔ You can often choose a shorter loan term

Which means you build equity faster and reduce long-term interest.

Let's look at real numbers based on an actual used SUV for sale on our lot today as we write this post at Central Vermont Auto Mart in Montpelier.

Brand New Window Sticker Price on this 2024 GMC Terrain SLT AWD

 
• MSRP: $35,890
 
• Negotiated purchase price after rebate: $32,000
 
• Customer has negative equity: $6,000
 
• Taxes & registration added: $2,000
 
• Total financed: $40,000

  84-month loan @ 7.79%
  📌 Estimated monthly payment: $600+ per month

And they're likely to still be underwater for years.

Now the Used Alternative - This Same 2024 GMC Terrain SLT AWD Used at Central Vermont Auto Mart

 
• Our  sale price: $24,995
 
• This is $3,655 below J.D. Power's average retail value for November 2025.
 
• More than $10,000 less than the manufactures suggested retail price (MSRP) new

If the customer finances $23,800 before taxes and fees on a:

  75-month loan @ 7.59%
  📌 Estimated monthly payment: $399

  ✔ That's a savings of about $200 per month
  ✔ A shorter loan term
  ✔ Thousands less financed
  ✔ A much better chance of avoiding negative equity

Even if you had to add in $6000 in negative equity, an allowance for taxes and registration fees, you are still substantially less than the estimated $600 plus a month payment on the vehicle if it was new.

Here's what we recommend to every customer:

✔ 1. Consider a late-model used vehicle

You get better value and avoid the steepest depreciation in the first year or two.

✔ 2. Avoid ultra-long 84-96 month loans

Stretching too far makes it hard to build equity.

✔ 3. Put money down when possible

Even $500-$1,000 helps protect you.

✔ 4. Keep each vehicle at least 4 years

Avoid trading before you've built equity. Longer term loans may require you keep the vehicle even longer, increasing the chance of major repairs only adding to the precarious financial position of negative equity and a big monthly outlay for payments.

✔ 5. Look at the total amount financed - not just the payment

Rolling in old debt gets expensive fast.

✔ 6. Partner with a dealer who shows you the numbers clearly

(That's us.)  If you don't understand how the numbers add up for your loan, ask us to break them down in detail, we want you to be comfortable not only your payment, but the term and amount financed shouldn't be a mystery.  We want to insure you understand how the total amount financed is calculated for your auto loan.

At Central Vermont Auto Mart, we:

 
• Specialize in late-model used cars that offer big savings compared to new
 
• Clearly explain new vs used payment differences if you want to make the comparision
 
• Help customers avoid rolling old debt into new loans, by making informed choices today that will save you money in the long run
 
• Price vehicles below average market values whenever possible
 
• Show real payment options based on realistic interest rates in Vermont, taxes, and fees

Our goal is simple: 👉 Helping you into the right vehicle with the right payment to match your budget - while trying to help keep you from being underwater when possible.