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Flipping the Script: Conquering Negative Car Equity

If you’re reading this article, chances are you’re feeling the weight of negative car equity. It can be a frustrating and stressful situation, but don’t worry – you’re not alone. Many people find themselves in this position, and with a little bit of knowledge and effort, you can turn things around.

Understanding Negative Car Equity

First, let’s break down what negative car equity actually means. Essentially, it’s when you owe more money on your car than it’s currently worth. This can happen for a few reasons, such as:

  • You bought a car and took out a loan with a high interest rate
  • You financed a car for a longer term than its value
  • You put little or no money down when you bought the car
  • The car has depreciated in value faster than you’ve been paying it down

Whatever the reason, negative car equity can cause problems when you want to sell or trade in your car. You’ll owe more money than you’ll get for the car, which means you’ll have to come up with extra cash to pay off the loan.

Options for Dealing with Negative Car Equity

So, what can you do if you find yourself in this situation? Here are a few options:

Option 1: Keep the Car

If you’re happy with your car and can afford the payments, one option is to simply keep the car until you’ve paid off the loan. This will give you time to build up equity in the car and hopefully get ahead of the depreciation curve.

Option 2: Refinance the Loan

Another option is to refinance the loan. This can be a good choice if you can get a lower interest rate, which will help you pay off the loan more quickly. However, keep in mind that refinancing will likely extend the length of the loan, which means you’ll pay more in interest in the long run.

Option 3: Trade in the Car

If you need to get rid of the car, you can trade it in for a new one. However, you’ll need to be prepared to pay off the negative equity as part of the deal. This means you’ll have a larger loan on your new car, which could put you back in the same situation down the road.

Option 4: Sell the Car

Finally, you can try to sell the car on your own. This can be a bit more work, but it gives you more control over the process. You’ll need to find a buyer who’s willing to pay enough to cover the loan balance, but if you can make it work, you’ll be free of the negative equity.

Tips for Flipping the Script

No matter which option you choose, there are a few things you can do to help flip the script and conquer negative car equity:

Tip 1: Pay Extra

One of the best ways to build up equity in your car is to make extra payments whenever possible. Even if it’s just a little bit extra each month, it can make a big difference in the long run.

Tip 2: Take Care of Your Car

Another way to slow down depreciation is to take good care of your car. Keep up with regular maintenance and clean the car regularly. A car that looks and runs well will hold its value better than one that’s neglected.

Tip 3: Avoid High-Interest Loans

When you’re shopping for a car, try to avoid loans with high interest rates. Even a difference of a few percentage points can add up to thousands of dollars over the life of the loan.

Tip 4: Consider a Shorter Loan Term

If you can afford a higher monthly payment, consider taking out a loan with a shorter term. This will help you pay off the car more quickly and build up equity faster.

Tip 5: Do Your Research

Before you buy a car, do your research to make sure you’re getting a good deal. Look up the value of the car and compare it to other similar cars in your area. Also, check reviews and reliability ratings to make sure you’re buying a car that will hold its value.


Negative car equity can be a frustrating and stressful situation, but it’s not the end of the world. By understanding your options and taking steps to build up equity in your car, you can turn things around and come out on top.


Can I sell a car with negative equity?

A: Yes, you can sell a car with negative equity, but you’ll need to come up with the extra cash to pay off the loan. This can be done by paying cash out of pocket or rolling the negative equity into a new loan.

How can I avoid negative car equity?

A: The best way to avoid negative car equity is to choose a car with a good resale value, take out a loan with a low interest rate, and pay extra whenever possible.

What happens if I stop making payments on a car with negative equity?

A: If you stop making payments on a car with negative equity, the lender can repossess the car and sell it at auction. You’ll still owe the remaining balance on the loan, and your credit score will be negatively affected.

How long does it take to build equity in a car?

A: The amount of time it takes to build equity in a car depends on the loan term, interest rate, and depreciation rate. Generally, it takes a few years to build up significant equity in a car.

Can I refinance a car with negative equity?

A: Yes, you can refinance a car with negative equity, but it may be difficult to find a lender who will do so. You may need to pay down some of the negative equity before refinancing.

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