Trade In Car With Negative Equity Calculator – To find out if you have positive or negative equity in your car, all you have to do is subtract how much you owe on the car from its current market value.
Knowing whether your equity is considered positive or negative is important if you are thinking about refinancing your car loan, selling the car or selling it to a dealership. Here’s what you need to know.
Trade In Car With Negative Equity Calculator
When borrowing money with a traditional car loan, the car acts as collateral for the loan. So if you default on the loan, the lender has the right to repossess the car and sell it at auction to recover your loan.
Negative Equity Car Finance
Positive equity occurs when the market value of the car exceeds the principal amount of your loan. For example, if you owe $10,000 on a car with a current market value of $12,500, you have $2,500 in positive equity.
Having positive equity in a car loan is a good sign for you and the lender because it means that when you sell the car, you will make enough to pay off the loan in full, leaving the lender satisfied and you without any additional debt.
If you have negative equity on your car loan, it means the car’s market value is less than the principal amount of the loan. As an example, a $12,500 car loan balance on a car now worth $10,000 leaves you with $2,500 in negative equity.
Negative equity can cause problems for you and the lender. If your car is totaled, for example, you may not get enough money from your insurance company to pay off the entire debt. And if you can’t pay off the negative equity amount, the lender may be without that money.
Of Car Purchases Now Include Negative Equity
In addition, if you sell your car or trade it in to buy a new one, the sale price will not be enough to pay off all the debt. To satisfy the lender in this scenario, you usually have to pay a lump sum amount of the difference, closing the loan.
In some cases, a seller may pay off the entire loan amount for you and roll the amount of negative equity into your new loan. Although this may seem attractive, remember that it will add to your new loan amount and you will continue to pay interest on it.
Remember, to calculate your car equity, you need to subtract the principal amount of your car loan from the car’s current value. While you can check the current loan amount by logging into your online lender account, getting the car’s fair market value takes a little time.
One way is to look up the car’s value in Kelley Blue Book. You enter the car’s year, make and model, as well as its current mileage and your ZIP code. If the model has more than one style, you’ll select yours from a list, then get the cost of the vehicle’s basic equipment or options.
How To Trade In A Car With Negative Equity
Finally, you provide the car’s color and its current condition—you can take a quick quiz if you’re not sure.
For example, a 2014 Hyundai Santa Fe Sport in good condition with 102,000 miles is worth about $8,237 if you sell it. 000 from sales.
If you owe $7,000 on the car, your equity will be positive, with $1,137 in positive equity with a trade-in or about $4,000 in positive equity with a private sale. Conversely, if you owe $9,500, you will have negative equity if you plan to sell it and positive equity if you plan to sell it to a private party.
In this scenario, it is important to know how much equity you have based on the type of sale so that you can make the best decision for the situation.
Car Finance Calculator
Trade-ins usually get a lower selling price because the seller then turns around and marks it up to sell to the next owner. As a result, it is usually better to sell your car to a private party.
If you don’t have time to go through that process or just want the convenience of dropping the car off at the dealership while you pick up your new one, selling it may be a better option. .
The best time to sell your car is when you have positive equity. If you have negative equity, you are on the hook for paying off the remainder of the loan, either immediately or in the form of a larger new loan. While the latter option may seem appealing, it may be better to wait until you pay off your current car loan balance first, if possible.
An exception to that rule is if your credit has improved significantly since you got the first loan. Even if you roll the negative equity into your new loan, the lower interest rate will save you money if the alternative is continuing to pay the high rate on your original loan.
What To Do When You’re Upside Down On Your Trade
If you’re thinking of buying a new car and trading in your current one, run the numbers to see if you have positive or negative equity. If you can sell the car to a private party and get more money from the transaction, try that route first.
If, however, selling the car is the best option for you and you have negative equity, you can check your credit score to see if you can get a lower interest rate on new loan. If so, trading in can save you money in the form of lower interest payments.
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If you find that you owe more than your car is worth, you have negative equity in your car. It can be very frustrating when you need a new car and you are looking to sell your car. You may be wondering how to remove
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