Bridging the Affordability Gap: Tools to Help Dealers with Upside-Down Buyers

Affordability is becoming an increasing concern in today’s automotive market. Whether due to consumers paying above MSRP during the new car inventory crisis or extending loan terms far beyond traditional lengths, more buyers are finding themselves upside-down on their car loans. In Q4 2024, nearly 25% of trade-ins toward new-car purchases involved negative equity, with the average amount owed reaching a record $6,838¹. Additionally, over half of used-vehicle originations in Q3 2024 began with a loan-to-value ratio above 120%¹.

Last year, the majority of car purchases included a trade-in³, and this trend is expected to increase as consumers rely on their trade-in value to offset higher prices brought on by new automotive tariffs. The rise in consumers with negative equity, combined with the growing reliance on trade-ins to make new vehicles more affordable, presents dealers with a clear challenge: bridging the affordability gap.

What This Means for Dealers

For dealers, this affordability gap leads to more complex and emotionally sensitive conversations. Customers aren’t just shopping for a new vehicle—they’re looking for a way out of a financial bind. Dealers must step into the role of trusted advisor, offering empathy, transparency, and practical solutions that help customers move forward without compromising their financial stability.

Navigating Negative Equity with Customers

When affordability is strained, many customers feel stuck—unsure how to proceed with a trade-in or purchase. This is where dealers can make a meaningful impact by helping customers understand their options and guiding them toward a solution. Some of the common strategies customers may consider include:

Putting more money down to reduce the loan balance

Extending the loan term to lower monthly payments

Delaying the trade-in until equity improves

Selling privately (though this may forfeit sales tax credits)

Rolling negative equity into a new loan, which can increase long-term costs

Waiting for manufacturer incentives to offset the gap

Leasing, which may absorb some negative equity depending on the amount

Working with a customer in a negative equity position can be challenging for sales teams as well. That’s why it’s essential for dealers to leverage tools that reduce friction early in the process and help consumers better understand the value of their trade-in.

How Kelley Blue Book® Instant Cash Offer Helps

Kelley Blue Book Instant Cash Offer (KBB ICO) is a powerful tool that supports affordability-focused conversations. By providing a transparent, data-backed offer, KBB ICO helps customers understand the true value of their vehicle and gives dealers a credible, third-party foundation for trade-in discussions. When the offer reflects a lower-than-expected value, KBB ICO allows dealers to remain in a supportive role—focused on helping the customer find a solution. This approach reduces friction and builds trust, both of which are essential in today’s affordability-driven market.

Enhancing Transparency and Engagement with New Features

This year, two powerful new features—Consumer Market Confidence and Counteroffer—have been launched to further support affordability-focused conversations.

Consumer Market Confidence adds a new dimension of clarity to trade-in conversations. By showing customers exactly how each offer is determined—including details like condition, mileage, color, and equipment—this feature builds trust from the start. Dealers can use this transparency to foster more open discussions, reassure customers, and make the trade-in process feel straightforward and fair. In fact, 72% of consumers are more likely to accept an offer when they understand how it was calculated⁴.

Counteroffer introduces a new layer of flexibility and engagement. When customers receive an offer, they can respond with a counter, opening up a direct dialogue. For dealers, this means gaining immediate insight into customer expectations—making it easier to negotiate, tailor solutions, and close more deals in a market where every interaction matters.

These innovations bridge the gap between buyers and sellers, empowering dealers with better tools to nurture conversations, build relationships, and turn every opportunity into a win.

The Bottom Line

As affordability challenges continue to shape the automotive landscape, dealers must adapt with empathy, transparency, and the right tools. Solutions like Kelley Blue Book Instant Cash Offer and new features like Consumer Market Confidence and Counteroffer empower dealers to support customers facing negative equity, close more deals, and build lasting trust.

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