If you owe more on your current car than it is worth, that gap is negative equity. Dealers can add it to the new loan, but you then pay interest on the old debt as well. Rolling $4,000 of it into a $34,000 purchase at 8% over 72 months adds about $70.13 a month.
Effect of rolled-in negative equity
| Negative equity rolled in | Amount financed | Monthly payment | Total interest |
|---|---|---|---|
| $0 | $34,510 | $605.07 | $9,055 |
| $2,000 | $36,510 | $640.14 | $9,580 |
| $4,000 | $38,510 | $675.21 | $10,105 |
| $6,000 | $40,510 | $710.27 | $10,630 |
You start the new loan owing more than the car is worth, which makes the next trade-in harder. Paying down the gap with cash, waiting, or choosing a cheaper car are alternatives to compare.
What we assumed
- $34,000 price, 5% down, 6.5% tax, 8% APR, 72 months.
Related calculators: Auto Loan Calculator, Personal Loan Calculator.
Questions people ask
How do I know my equity?
Compare your payoff amount from the lender with the car's trade-in value from several quotes.
Estimates for general education, not financial, tax or legal advice. Real results depend on your lender, employer, tax situation and location. See the disclaimer.