Negative equity occurs when the value of a vehicle falls below the amount of money owed on a loan. This can happen for a number of reasons. Depreciation, changes in the market, or interest charges can all cause negative equity. Let’s look at a simple example. If you buy a car for $20,000 and take out a loan for $18,000, but the car’s value drops to $15,000, you now have negative equity of $3,000.

Negative equity occurs when the value of a vehicle falls below the amount of money owed on a loan. This can happen for a number of reasons. Depreciation, changes in the market, or interest charges can all cause negative equity. Let’s look at a simple example. If you buy a car for $20,000 and take out a loan for $18,000, but the car’s value drops to $15,000, you now have negative equity of $3,000.

Negative equity can make it difficult to buy a new vehicle because it increases the amount of money you need to borrow. This means you may not be able to qualify for a loan or may have to pay higher interest rates. Additionally, if you trade in your old vehicle with negative equity, you may be required to pay off the negative equity before the dealership can give you credit for the trade-in.

Another option is to roll over the negative equity into your new loan. This means that the negative equity amount will be added to the amount you are borrowing for your new vehicle. While this may make your new loan larger and increase your monthly payments, it can be a good option if you need a new vehicle right away.

The good news is..

that negative equity on your old car doesn’t mean it is impossible to buy a new vehicle. There are several options available to you to overcome negative equity and still buy a new vehicle. Let’s look at these options a little closer:

Sell your vehicle privately

Selling your old vehicle privately can also be a good option for dealing with negative equity. This allows you to get a better price for your old vehicle than you would get from a dealership, and you can use the extra money to pay off the negative equity before buying a new vehicle. It does mean a lot more work for you, as you would have to list and manage the sale of your own vehicle, and this could take quite some time.

Lease a vehicle

Leasing a vehicle can also be a good option for people with negative equity. Since leases typically have lower monthly payments than loans, you may be able to afford a new vehicle even with negative equity. However, keep in mind that you will not own the vehicle at the end of the lease, and there may be restrictions on the number of miles you can drive.

Conclusion

Negative equity can be a frustrating obstacle when trying to buy a new vehicle, but it is not an insurmountable one. Kiefer Nissan of Corvallis knowledgeable sales and finance team are here to help find the best option for you, no matter what your equity or credit situation may be. Whether you decide to pay off the negative equity, roll it over into a new loan, or lease a vehicle, you can still get the new Nissan Frontier, Altima, or Rogue or pre-owned vehicle you need.

We know that car buying is a big decision for most, and you want to explore all your options before making that decision you are upside down on your current vehicle, or have questions about navigating negative equity, don’t hesitate to reach out to Kiefer Nissan of Corvallis for guidance.