Trading In Your Vehicle: Positive vs. Negative Equity
Trading In Your Vehicle: Positive vs. Negative Equity
Posted on January 19, 2023
First things first, it is important to note that it is always better to pay off your current vehicle before trading it in. Obviously, that is not always an option due to several different scenarios. Be sure to always do your research on how your vehicle is worth by using reputable estimators - which can be found on our website - and avoid using places like Facebook, or Kijiji.
You may not be looking to trade your vehicle in yet, however, it is never to learn how the difference between positive and negative equity and how it can affect your next purchase.
Positive Equity
Positive equity is when your vehicle is worth more than you still owe. Positive equity will reduce the loan amount and payments on the new vehicle.
For example: You are looking at a $20,000 vehicle. If your current vehicle is worth $10,000 and you still have $5,000 left owing, the positive equity of $5,000 is taken off the new loan making the loan amount $15,000.
Negative Equity
Negative Equity is when your vehicle is worth less than you still owe. Negative equity can be rolled into your new loan which will increase the loan amount and payments.
For example: You are looking at a $20,000 vehicle. If your vehicle is worth $10,000 and you still have $15,000 left owing, the negative equity of $5,000 is added to the new loan making the loan amount $25,000.
Be sure to always trade your vehicle in with a reliable source such as ourselves. Contact us today if you have more questions or to get your trade-in process started.