Negative Equity Calculator – Are You Underwater?
Negative equity on a car loan — also called being "underwater" or "upside down" — occurs when you owe more on your loan than your vehicle is currently worth. This is a common situation, especially in the first 1–3 years of a car loan when depreciation outpaces principal paydown.
What Causes Negative Equity?
- Rapid Depreciation: New cars lose 15–25% of value in the first year.
- Low Down Payment: Financing 100% or rolling in taxes/fees creates immediate negative equity.
- Long Loan Terms: 72–84 month loans pay down principal slowly.
- High Interest Rates: More of each payment goes to interest, not principal.
Options When You Have Negative Equity
- Keep the Car: Continue making payments until equity turns positive.
- Pay Extra: Extra principal payments can eliminate negative equity faster.
- Sell Privately: Private sales yield higher prices than dealer trade-ins, narrowing the gap.
- Roll Into New Loan: Risky — adds the deficit to a new loan, compounding the problem.
