What "underwater" means
New cars often lose 15–20% of their value each year early on. If your loan balance falls slower than the car's value, you owe more than you could sell it for — negative equity. Trading in an underwater car rolls that debt into the next loan.
How to avoid it
Put at least 10–20% down, keep the term at 60 months or less, and compare loans by APR. The yearly value loss here is an estimate; check real resale prices for your model.