1. What is Negative Equity in Auto Loans?

Negative equity occurs when you owe more on your current auto loan than the car is worth. This calculator helps determine your new monthly payment when rolling negative equity into a new auto loan.

2. How Does the Calculator Work?

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

Where:

• \( loan\_amount \) — Amount of new loan (USD)
• \( negative\_equity \) — Amount owed above car's value (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Loan term in months

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

3. Importance of Calculating Payments with Negative Equity

Details: Understanding the impact of rolling negative equity into a new loan helps borrowers make informed decisions about vehicle purchases and financing options.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What is considered "bad" negative equity?
A: Generally, negative equity exceeding 20% of the new car's value is problematic as it increases financial risk.

Q2: How does negative equity affect my loan?
A: It increases your loan amount, resulting in higher monthly payments or longer loan terms.

Q3: Are there alternatives to rolling negative equity?
A: Yes, you can pay the difference out of pocket, keep your current car longer, or negotiate a higher trade-in value.

Q4: Does this calculation include taxes and fees?
A: No, this calculates only the base payment. Actual payments may be higher when including taxes, fees, and insurance.

Q5: What's a reasonable loan term when rolling negative equity?
A: While lenders may offer long terms (72-84 months), shorter terms (60 months or less) help avoid being "upside-down" again.