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Car Financing with Negative Equity Formula:
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Negative equity occurs when you owe more on your current car loan than the car is worth. This calculator helps determine your new monthly payment when rolling negative equity into a new car loan.
The calculator uses the standard loan payment formula adjusted for negative equity:
Where:
Explanation: The formula calculates the fixed monthly payment required to pay off the combined loan amount (new loan + negative equity) over the specified term at the given interest rate.
Details: Rolling negative equity into a new loan increases both your monthly payment and total interest paid. This calculator helps you understand the financial impact before making a decision.
Tips: Enter the new car loan amount, your negative equity amount, annual interest rate (APR), and desired loan term in months. All values must be positive numbers.
Q1: What is considered a large amount of negative equity?
A: Generally, more than 10-15% of the new car's value is considered significant negative equity that may affect loan approval.
Q2: How does negative equity affect my loan?
A: It increases both your monthly payment and total interest paid, and may result in being "upside down" on your new loan longer.
Q3: Are there alternatives to rolling negative equity into a new loan?
A: Yes, you could pay the difference out of pocket, keep your current car longer, or negotiate a higher trade-in value.
Q4: Does this calculator account for taxes and fees?
A: No, it calculates only the principal and interest portion. Actual payments may be higher with taxes, fees, and insurance.
Q5: What's a reasonable loan term when including negative equity?
A: While longer terms reduce monthly payments, they increase total interest. 60-72 months is common but consider shorter terms if possible.