Auto Payment Calculator With Negative Equity

Auto Payment Formula:

\[ \text{payment} = \frac{(\text{loan\_amount} + \text{negative\_equity}) \times r}{1 - (1 + r)^{-n}} \]

Loan Amount:

USD

Negative Equity:

USD

Annual Interest Rate:

Loan Term:

months

Monthly Payment:

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1. What is the Auto Payment Calculator With Negative Equity?

This calculator helps determine your monthly car payment when rolling negative equity from a previous vehicle into a new auto loan. It accounts for both the new vehicle's purchase price and any remaining debt from your trade-in.

2. How Does the Calculator Work?

The calculator uses the standard auto loan payment formula adjusted for negative equity:

\[ \text{payment} = \frac{(\text{loan\_amount} + \text{negative\_equity}) \times r}{1 - (1 + r)^{-n}} \]

Where:

$ \text{loan\_amount} $ — Amount financed for the new vehicle (USD)
$ \text{negative\_equity} $ — Amount owed on trade-in beyond its value (USD)
$ r $ — Monthly interest rate (annual rate ÷ 12)
$ n $ — Loan term in months

Explanation: The formula calculates the fixed monthly payment required to fully amortize the combined loan amount (new vehicle + negative equity) over the specified term.

3. Importance of Accurate Payment Calculation

Details: Understanding your true monthly payment when rolling negative equity helps with budgeting and prevents financial strain. Negative equity increases both your monthly payment and total interest paid.

4. Using the Calculator

Tips: Enter the new vehicle loan amount, negative equity amount, annual interest rate (APR), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What exactly is negative equity?
A: Negative equity occurs when you owe more on your current vehicle than it's worth, common with long loan terms or rapid depreciation.

Q2: How does negative equity affect my payment?
A: Each $1,000 of negative equity typically increases your monthly payment by $20-$30, depending on loan terms.

Q3: Is rolling negative equity a good idea?
A: Generally not recommended as it increases your debt burden, but sometimes unavoidable. Consider alternatives like paying the difference upfront.

Q4: Does this calculator account for taxes and fees?
A: No, it calculates payment based on loan amount only. Actual payment may be higher with taxes, registration, and dealer fees.

Q5: What's a reasonable loan term when rolling negative equity?
A: Avoid extending beyond 60 months to prevent being "upside-down" again. Shorter terms minimize total interest.