Should You Trade in a Car with Negative Equity?
Trading in a car with negative equity is a decision that many car owners face, especially when upgrading to a new vehicle or dealing with financial strain. Negative equity—also known as being "underwater" or "upside-down" on a loan—means that you owe more on your car loan than the vehicle's current market value. While trading in a car with negative equity is possible, it comes with financial implications that you should carefully consider. In this guide, we’ll explore what negative equity is, how it affects your trade-in options, and whether trading in your car is the right move for you. Understanding Negative Equity What is Negative Equity? Negative equity occurs when the remaining balance on your auto loan exceeds the resale or trade-in value of your vehicle. For example, if you owe $20,000 on your car loan but the trade-in value is only $15,000, you have $5,000 in negative equity. Causes of Negative Equity Several factors contribute to negative equity, i...
