Negative Equity and Trade-Ins

Negative equity means you owe more on your car than it is worth. This can happen when depreciation is faster than loan payoff, especially with long terms, small down payments, or high APRs.

Why rolling debt is risky

Dealers may offer to roll old negative equity into a new loan. That makes the new vehicle more expensive immediately and can create an even larger negative-equity cycle.

How to reduce negative equity

• Make a larger down payment
• Choose a shorter loan term
• Buy a less expensive vehicle
• Pay extra principal when possible
• Keep the car longer before trading

Before trading in

Compare your payoff amount with realistic trade-in value. If the gap is large, waiting or paying down the balance may be safer than replacing the car.