IAA Analyzes Q2 2026 Negative Equity and Depreciation Trends

Introduction

The used car market continues to evolve following several years of volatility. Persistently higher interest rates, longer loan terms, elevated vehicle prices and ongoing changes in vehicle supply and consumer demand remain key influences on automotive financing trends. IAA, which offers an online vehicle marketplace and digital solutions for customers, is uniquely positioned to evaluate trends in the used car and salvage vehicle markets. Using a data-driven approach, this article examines the 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 market dynamics to provide broader context, offering a more comprehensive view of the U.S. auto financing environment.

IAA is committed to data analytics and transparency, and our goal is to share industry insights through ongoing reports such as this. View the methodologies.

IAA Loan Payoff® Negative Equity Transactions Decrease to 52.5%

The share of U.S. motorists who owe more on their vehicles than those vehicles are currently worth remains historically high. Elevated negative equity can increase risk for consumers and lenders alike and may impact liquidity across the automotive ecosystem.

Key contributors to negative equity include vehicle pricing trends, loan structure and duration, interest rates, and depreciation. IAA Loan Payoff helps insurers and lenders settle total-loss claims involving lien and lease accounts, whether they carry positive or negative equity. The platform is designed to efficiently manage complex total-loss transactions.

In Q2 2026, negative equity accounted for 52.5% of lien-based IAA Loan Payoff transactions. While this marks a slight decrease from 53.6% in Q1 2026, the share remains above 50% and continues to reflect historically elevated levels of negative equity. The persistence of negative equity underscores ongoing affordability challenges facing vehicle owners and highlights the impact of financing conditions that remain above pre-pandemic norms.

Negative Equity Rates Among Lien-Based IAA Loan Payoff Transactions (2023-Q2 2026)

Vehicle Depreciation: Declines Accelerate in Q2

Depreciation measures how quickly a vehicle's value declines over time and plays a central role in determining equity positions. Depreciation is influenced by factors such as age, mileage, make, model, condition, accident history, and overall supply and demand.

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.

IAA's depreciation analysis uses internal data dating to 2021 and evaluates model-year salvage vehicle prices for IAA's top 10 selling models from 2016, 2018, 2020, 2022 and 2024. This population variance minimizes outlier impact and includes only insurance-sourced vehicles, excluding catastrophe and total-burn units.

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. Furthermore, the observed depreciation trends appear equally distributed across model years.

In Q2 2026, the model years evaluated depreciated -12.87% year over year, meaning the vehicles in the analyzed population sold for 12.87% less than in Q2 2025. Compared with the -7.14% year-over-year depreciation observed in Q1 2026, this quarter reflects a faster pace of salvage value decline. While there was a reversal in QoQ depreciation, the Q2 mark remains slightly above the market average over the last 3 years.

Observed Salvage Vehicle Depreciation Over Time: 2022-Q2 2026 (Year over Year)

Conclusion: Negative Equity Remains Elevated as Depreciation Accelerates

Negative equity levels remained elevated in Q2 2026, with more than half of lien-based total- loss transactions involving negative equity. At the same time, vehicle depreciation increased, with analyzed salvage vehicles declining -12.87% year over year.

As these trends persist, IAA Loan Payoff remains a critical solution for carriers and lenders managing total-loss settlements in a complex financing environment. IAA will continue to monitor and report on these dynamics, with subsequent quarterly updates planned as new data becomes available.