Guide
What negative equity means
Negative equity, or being upside down, means you owe more on your car loan than the car is worth.
How it happens
Cars often lose value faster than a loan balance falls, especially with a small down payment, a long loan, or taxes, fees and add-ons included in the amount financed.
What rolling it over costs
When you trade in an upside-down car, the dealer can add the leftover balance to your new loan. You then pay interest on debt from the old car.
Example: you owe $18,000 and the car is worth $13,000, so you have $5,000 of negative equity. Rolled into a 60-month loan at 7% APR, that $5,000 alone adds about $99 a month and roughly $940 of interest — before counting the new car itself. The new loan also starts upside down, which makes the next trade harder.
Ways to reduce it
- Keep the current car longer and pay the balance down.
- Pay the difference in cash at trade-in instead of financing it.
- Choose a cheaper next car, a larger down payment or a shorter loan.
- Review add-ons and fees before they're added to the amount financed.
See your own numbers with the negative equity payment calculator, or the payment with trade-in calculator to compare trade value and payoff.
Educational estimates only — not financial, tax or legal advice. Results depend on the inputs you provide and simplified assumptions. Confirm rates, taxes and fees with lenders, dealers and insurers before making decisions.