IAA Analyzes Q4 2025 Negative Equity and Depreciation Trends

Introduction

The used car market has experienced dramatic shifts over the last five years. Higher interest rates, supply chain complexities, elevated insurance costs, and shifts in consumer preferences have all been factors. IAA, which offers an online vehicle marketplace that also includes digital solutions that support our customers, is uniquely qualified to evaluate trends within the used car and salvage vehicle markets. Using a data-driven approach, this article takes a deeper look at the current state of negative equity and salvage vehicle depreciation.

IAA closely tracks negative equity trends on vehicle transactions within the IAA Loan Payoff® portal. We also monitor new and used vehicle trends for additional insights, providing a more complete assessment of the state of the U.S. auto financing landscape.

IAA is highly committed to data analytics and transparency, and our intent is to share industry-related trends that we've observed through ongoing reports like these. View the methodologies.

IAA Loan Payoff® Negative Equity Transactions Exceed 50% for Full Year

The amount of U.S. motorists who owe more on their vehicles than the vehicles are currently worth is persistently high. When negative equity is pervasive, it can introduce more risk for consumers and lenders and affect the liquidity of the entire automotive industry.

Financing terms, loan terms, vehicle depreciation, and valuation trends in general are some of the key drivers of negative equity. Loan Payoff allows insurers and lenders to settle total loss transactions, covering both lien and lease accounts, whether they involve negative or positive equity. Loan Payoff assists lender and insurance carriers with settling even the most complex total loss transactions.

We've observed an increased negative equity trend every year since Loan Payoff's inception, and 2025 set an all-time high with a 51.4% share of negative equity transactions. The year-over-year increase of 2.3% is relatively modest, but it continued a three-year trend. Negative equity transaction share rose 12.2% from 2022-23, and 8.6% from 2023-24.

The consistent increases in negative equity can largely be attributed to historically high prices of new and used vehicles, which have been driven by multiple factors, including supply chain constraints, longer loan terms, and higher interest rates.

Negative Equity Rates Among Lien-Based IAA Loan Payoff transactions (2022-2025)

Vehicle Depreciation: Broadly in Line with Market Trends

Vehicle depreciation represents the rate at which a vehicle loses its value over time. Every vehicle holds a value relative to its lifecycle status. Therefore, depreciation can be measured and calculated for new, used, and even salvage vehicles. Vehicle age, make, model, mileage, condition, accident history, and vehicle history are the key factors that affect depreciation.

The value of a vehicle and how it holds that value are key contributors to its negative equity or positive equity status. This explains why measuring and analyzing depreciation trends is critical to understanding negative equity trends.

The methodology and internal data we use consider depreciation levels dating back to 2021. We evaluated the model-year salvage vehicle prices of IAA's top 10 selling models for the model years 2016, 2018, 2020, 2022, and 2024. We selected this population based on the higher volumes of these vehicles to eliminate outlier data.

The population used only includes insurance-sourced vehicles and does not include any vehicles from catastrophe events or total-burn vehicles.

Model-Year Salvage Vehicle Prices Over Time (Indexed)

The depreciation trends for the population used show a relatively predictable trend for the 2016, 2018, 2020, 2022, and 2024 model-year vehicles. Further, the observed depreciation trends appear relatively equally distributed across the model years.

Vehicle depreciation showed a year-over-year decline of 9.28% in Q4 2025. The -9.28% depreciation rate indicates the population of vehicles included in the calculation sold for 9.28% less in Q4 2025 compared to Q4 2024. This is a lower rate of depreciation when compared to the previous eight quarters and indicates depreciation rates have eased vs. market peak.

Observed Salvage Vehicle Depreciation Over Time: 2022-2025, Year Over Year

Conclusion: Stabilizing Vehicle Depreciation and Negative Equity Levels

Although depreciation eased in the most recent quarter, negative equity rates continue to hover at elevated levels. As these rates remain high and we continue to monitor these trends, Loan Payoff remains an essential resource for sellers navigating total loss transactions. We will continue to release quarterly updates to this report, with the Q1 2026 edition scheduled for publication in April.