EchoSense Quantitative Think Tank Center|So you're upside down on your car loan. You're not alone.

More Americans are EchoSense Quantitative Think Tank Centerupside down on their car loans, and the average amount they owe is at an all-time high, according to a new survey from car comparison site Edmunds.

In the three months ended in September, 24.2% of Americans who traded in their car toward a new vehicle purchase owed more on the trade-in than it was worth, which is considered "upside down" or "underwater," Edmunds said. That’s up from 23.9% in the prior three months and 18.5% a year ago. Additionally, the amount they owed on those trade-ins climbed to a record high of $6,458, with 22% owing at least $10,000 and 7.5% owing $15,000 or more, it said.

Auto loans account for about 25% of nonmortgage consumer credit, according to the Federal Reserve, and they can provide a window into the financial health of borrowers and overall household financial well-being.

"Consumers owing a grand or two more than their cars are worth isn't the end of the world, but seeing such a notable share of individuals affected at the $10,000 or even $15,000 level is nothing short of alarming,” said Jessica Caldwell, Edmunds' head of insights.

Why are so many Americans underwater on car loans?

Various factors are contributing to this trend, Edmunds experts said.

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First, Americans who bought new vehicles during the inventory crunch of 2021-2022, just after the pandemic, paid peak prices, Caldwell said. They “paid over MSRP (manufacturer's suggested retail price), so they didn't chip away at the principle of their loans in a traditional manner,” she said.

Then, as manufacturers replenished inventories and the economy slowed, automakers reintroduced incentives, which cut trade-in values for near-new vehicles, Caldwell said.

Finally,  car shoppers are stomaching higher prices by “increasingly opting into longer loan terms to reduce monthly payments,” Caldwell said.

Those longer loan terms, coupled with trading in vehicles earlier than they should, put car owners at risk of rolling negtive equity into their next loan, she said.

Edmunds separately found that even with longer loan terms, new-vehicle shoppers are taking on $1,000-plus monthly payments at near-record levels. These buyers made up 17.4% of new-car shoppers from June through September, it said.

A Federal Reserve study last month found higher monthly car payments usually led to higher delinquencies.

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Who’s most likely to be underwater?

 It can be anyone. Negative equity is prevalent across all vehicle types being traded in, Edmunds found.

For example, midsize SUVs, compact SUVs and large trucks made up 19.5%, 17.3% and 10.3%, respectively, of all vehicles traded in with negative equity.

"It's easy to assume that only specific consumers trading in higher-ticket luxury vehicles are the ones underwater on their car loans, but the reality is that this is a problem across the board," said Ivan Drury, Edmunds' director of insights.

How can Americans avoid being underwater on a car loan?

Americans should keep up with regular maintenance and hold on to their cars as long as possible to avoid additional declines in value, Edmunds said.  

If you must buy a car, Drury said:

• Shop around for incentives and lower APR financing, although those are less common in this market.
• Consider vehicles proven to have higher resale values, or ones that offer other financial benefits like better mpg (miles per gallon) or lower insurance costs.
• Find a car you really want and like “because if you don't, you'll probably end up making the same mistake of trading in your newish vehicle too soon,” he said.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and  subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.