Negative Equity Calculator

Year by year

Worked example

You are buying a $35,000 car with $2,000 down and $2,900 of taxes and fees in the loan. Your current car is worth $8,000 but you owe $11,000 on it, so $3,000 of negative equity goes into the new loan. The loan is 7.5% APR for 72 months, and the car loses 20% of its value in the first year and 15% a year after that.

• Amount financed: $38,900.00, a payment of $672.59.
• You owe more than the car is worth from day one until month 41.
• The gap is deepest at month 12, when you would owe $5,565.58 more than the car is worth. If the car were totaled then, that is roughly what you would still owe after an insurance payout of the car's value.
• It would take $6,450.09 more down to never be underwater.

Without the rolled-over $3,000, the same loan is still underwater until month 35, because a small down payment and a long term let the balance trail the car's value. Shortening the loan to 48 months gets you above water by month 18, at a payment of $940.56.

Why it matters

Being underwater is not a problem on its own if you keep the car and keep paying. It becomes one when you need to get out of the loan: the car is totaled or stolen, you need to sell, or you want to trade it in. Then the gap has to be paid in cash or rolled into the next loan.

Rolling it over is common and costly. In a CFPB study of vehicle loans made from 2018 to 2022, 11.6% included negative equity from a prior loan. Those borrowers financed more, had average monthly payments 27% higher than borrowers with no trade-in, had an average term of 73 months, and were more than twice as likely to have their account assigned to repossession within two years as borrowers with a positive-equity trade-in.

If you are going to be underwater for a long stretch, GAP coverage pays the difference between an insurance payout and your loan balance if the car is totaled. It is optional; the FTC lists it as a common add-on and says it is ok to say no and to ask the price. Compare the dealer's price with your own insurer's.

Where to get depreciation numbers for your car

No single depreciation rate fits every car. AAA's 2025 Your Driving Costs study found average depreciation of $4,334 a year across the new models it studied (five years, 15,000 miles a year), ranging from $2,629 a year for small sedans to $6,041 for half-ton pickups. For your own car, better inputs are:

• A lease quote's residual. The residual value on a lease is the leasing company's estimate of what that exact model will be worth at the end of the term. A 36-month residual of 58% means it expects about 42% of the value to be gone in three years.
• Used prices for the same model. Compare listings or pricing-guide values for the same model one, two and three years old with its price new.

Adjust the two depreciation fields until the curve matches what you find.

Frequently asked questions

How do I get out of negative equity faster?

Pay extra toward principal, refinance to a lower rate or shorter term, or keep the car longer so the balance catches up with the value. Rolling the balance into another loan does not remove it; it moves it.

Why am I underwater even with no trade-in?

A car starts losing value the day you buy it, while each early loan payment includes a large share of interest, so the balance falls slowly at first. With a small down payment, financed taxes and fees, and a long term, the balance can stay above the value for years.

Is the "extra down" figure in addition to my current down payment?

Yes. It is how much more cash, on top of what you entered, would keep the loan balance at or below the estimated value every month.