Negative Equity
Negative Equity Explained
Owe more on your vehicle than it's worth? Learn what negative equity means, how it can affect a trade-in and what options you may have.
What Is Negative Equity?
Negative equity means you owe more on your current vehicle loan than your vehicle is worth.
This can happen for a number of reasons, including vehicle depreciation, a small down payment, financing additional costs or simply having a remaining loan balance that is higher than the vehicle's current market value.
If your vehicle is worth $20,000 and your current loan balance is $24,000, you have $4,000 in negative equity.
What Does Negative Equity Mean When You Trade?
If you trade in a vehicle with negative equity, the difference between what you owe and what your vehicle is worth still needs to be addressed as part of the transaction.
Depending on your situation and the financing available to you, there may be different ways to handle that difference. Our finance team can help you understand the numbers before you make a decision.
Start by finding out your current vehicle loan payout or balance and comparing it with your vehicle's current value. If the amount you owe is higher than the vehicle's value, you have negative equity. Your lender can provide your current loan balance, and our team can help you understand your vehicle's trade-in value.
When you trade in a vehicle, the trade-in value is applied toward your existing loan. If you owe more than the vehicle is worth, there is a remaining difference that needs to be considered when looking at your next vehicle and financing options.
In many cases, yes. Having negative equity does not automatically mean you cannot trade your vehicle. However, the amount of negative equity and the financing available to you can affect your options. Our team can help you review the numbers before you decide.
No. Negative equity doesn't disappear simply because you trade in the vehicle. The difference between your loan balance and the vehicle's trade-in value still needs to be addressed as part of the transaction.
Depending on the amount of negative equity, the vehicle you're purchasing and the financing available to you, some or all of the difference may be able to be included in the new financing. This is subject to lender approval and the specific terms of the transaction.
You may have several options depending on your situation. You could continue paying down your current loan, make a larger down payment when purchasing your next vehicle, or explore whether trading now makes sense for you. Our team can help you understand the numbers and compare your available options.
Know Your Numbers Before You Trade
The first step is understanding what your current vehicle is worth and how much you still owe.
Getting a trade estimate can give you a better idea of where you stand. From there, our finance team can help you understand how your trade value, remaining loan balance and next vehicle purchase may work together.
There is no one-size-fits-all solution to negative equity. We'll help you look at the numbers so you can make an informed decision.
Ready to See Where You Stand?
Find out what your vehicle may be worth, then talk with our team about your options.
VALUE YOUR TRADE CONTACT OUR TEAM
