Negative Equity Auto Loan Payment Calculator
Updated on December 31, 2025
Calculate your new monthly car payment when rolling negative equity (also called being "upside down") from your current vehicle into a new auto loan. This calculator shows how much extra interest you'll pay and provides a complete amortization schedule with optional extra payment scenarios.
Your Results
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Monthly Payment
Total Financed Amount
$—
Total Principal Paid
$—
Total Interest Paid
$—
Loan Payoff Date
—
Add Extra Payments
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Added to your monthly payment
One extra payment per year
Single extra payment
Amortization Schedule
Month-by-month breakdown of your loan payments
How It's Calculated
The calculator uses the standard amortization formula for installment loans:
Step 1: Calculate Total Financed Amount (PV)
Step 2: Convert Annual Rate to Monthly Rate
Step 3: Determine Number of Payments
Step 4: Calculate Monthly Payment (PMT)
Note: If APR = 0%, the formula simplifies to PMT = PV / n
What Is Negative Equity?
Negative equity occurs when you owe more on your car loan than your vehicle is currently worth. This situation is also called being "upside down" or "underwater" on your loan. For example, if your car's trade-in value is $15,000 but you still owe $18,000 on your loan, you have $3,000 in negative equity.
When trading in a vehicle with negative equity, that deficit amount gets rolled into your new loan, increasing the total amount you're financing and the interest you'll pay over time.
How Negative Equity Affects Your New Loan
Rolling negative equity into a new auto loan has several consequences:
- Higher Monthly Payments: You're financing more than the new car's purchase price, resulting in larger payments.
- More Interest Paid: A larger principal balance means you'll pay more in interest charges over the loan term.
- Extended Negative Equity: You may remain upside down on your new loan for a longer period, especially if the vehicle depreciates quickly.
- Loan-to-Value Concerns: Lenders may be hesitant to approve loans with high LTV ratios, or may charge higher interest rates.
- Limited Refinancing Options: High negative equity can make refinancing difficult until you build more equity in the vehicle.
Negative Equity Loan Payment Formula
The monthly payment calculation follows the standard amortization formula with an adjusted principal that includes the negative equity rollover:
Where:
- PMT = Monthly payment
- PV = Total financed amount (new loan + negative equity + fees)
- r = Monthly interest rate (APR ÷ 12)
- n = Number of monthly payments
Examples
Example 1: Small Negative Equity
Scenario:
- Negative equity rollover: $2,000
- New car loan amount: $20,000
- Loan term: 60 months (5 years)
- Interest rate: 6.5% APR
Results:
- Total financed: $22,000
- Monthly payment: $430.16
- Total interest paid: $3,809.60
- Without rollover, interest would be: $3,463.27 (savings of $346.33)
Example 2: Larger Negative Equity with Longer Term
Scenario:
- Negative equity rollover: $6,000
- New car loan amount: $30,000
- Loan term: 72 months (6 years)
- Interest rate: 8.5% APR
Results:
- Total financed: $36,000
- Monthly payment: $605.71
- Total interest paid: $7,611.12
- Without rollover, interest would be: $6,342.60 (additional cost of $1,268.52)
Common Mistakes
- Confusing Trade-In Value vs. Payoff Amount: The trade-in value is what the dealer will pay for your car, while the payoff amount is what you owe. The difference is your equity (positive or negative).
- Ignoring Fees and Taxes: Sales tax, registration fees, and dealer fees add to your financed amount and increase your monthly payment.
- Extending the Loan Term to Hide Payment Increases: While a longer term lowers monthly payments, you'll pay significantly more interest over time and remain upside down longer.
- Rolling Too Much Negative Equity: Lenders typically cap the loan-to-value ratio at 125-140%, meaning excessive negative equity may result in loan denial.
- Not Shopping Around: Different lenders have different policies on negative equity. Credit unions often offer better terms than dealership financing.
- Skipping the Down Payment: A larger down payment can offset negative equity and reduce your financed amount.
Frequently Asked Questions
What is negative equity on a car?
Negative equity is when you owe more on your auto loan than your vehicle is currently worth. For instance, if your car's value is $12,000 but you still owe $15,000, you have $3,000 in negative equity.
Can you roll negative equity into a new car loan?
Yes, most lenders allow you to roll negative equity into a new auto loan, though there are limits. Lenders typically cap the loan-to-value ratio, and excessive negative equity may result in higher interest rates or loan denial.
How does negative equity affect my monthly payment?
Negative equity increases your total financed amount, which directly raises your monthly payment. For example, rolling $3,000 in negative equity into a 60-month loan at 7% APR adds approximately $59 to your monthly payment.
Should I refinance an upside-down car loan?
Refinancing can lower your interest rate and monthly payment, but it won't eliminate negative equity. Consider refinancing if you can secure a significantly lower rate, but be aware that extending the term may increase total interest paid.
How do I calculate my car's negative equity?
Subtract your car's current market value from your loan payoff balance. Use resources like Kelley Blue Book or Edmunds to estimate your vehicle's value, then contact your lender for your exact payoff amount.
What happens to negative equity when trading in a car?
The negative equity amount is typically added to your new loan balance. If you have $4,000 in negative equity and buy a $25,000 car, you'll finance $29,000 (plus any taxes and fees).
How can I avoid negative equity on a car loan?
Make a substantial down payment (20% or more), choose shorter loan terms, avoid rolling additional costs into the loan, make extra principal payments, and keep the vehicle longer to build equity.
Can I trade in a car with negative equity for a cheaper car?
Yes, but the negative equity still gets added to the new loan. Trading for a cheaper car may result in a more manageable payment, but you'll still finance the deficit from your previous vehicle.
Does negative equity hurt my credit score?
Negative equity itself doesn't directly affect your credit score. However, the resulting higher loan balance and payments may strain your finances, potentially leading to missed payments that would damage your credit.
How much negative equity can I roll into a new car loan?
Most lenders limit the loan-to-value ratio to 125-140% of the vehicle's value. For a $30,000 car, this means approximately $7,500-$12,000 in negative equity could be rolled in, depending on the lender's policies.
Is it better to pay off negative equity or roll it into a new loan?
Paying off negative equity in cash is financially better, as it avoids paying interest on that amount. However, if cash isn't available, rolling it into a new loan may be necessary—just choose the shortest term you can afford.
Can gap insurance help with negative equity?
Gap insurance covers the difference between your loan balance and your car's value if it's totaled or stolen, but it doesn't help with negative equity when trading in. It only protects you in the event of a total loss.
Disclaimer: This calculator is provided for educational purposes and general estimation only. Actual loan terms, monthly payments, and interest rates may vary based on your credit profile, lender policies, state regulations, and specific loan terms. The calculations assume simple interest amortization and do not account for variations in payment dates, leap years, or other factors that may affect actual loan costs. Always verify exact figures with your lender or financial institution before making financing decisions. Sales tax rates, dealer fees, and registration costs vary by state and locality.
External Resources:
Consumer Financial Protection Bureau: Upside Down Auto Loans
Edmunds: Understanding Car Values and Trade-Ins