Negative Equity Explained
Updated
What it means to be underwater on a car loan, why rolling it forward is risky, and how to dig out.
You have negative equity when you owe more on your car loan than the car is worth. Rolling that balance into a new loan increases the new financed amount, the monthly payment, and the loan-to-value, and it can leave you underwater on the next vehicle from day one.
You have negative equity when the trade-in's payoff exceeds its value. Rolling negative equity into a new loan increases the financed amount, the payment, and the loan-to-value on the new vehicle.
Use our trade-in calculator to see the impact and watch for the LTV warnings.