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Blog / Finance & Part-Exchange / Negative Equity on Car Finance

Written by : sshields

Published on:: 04/11/2016

Negative Equity on Car Finance

What is Negative Equity?

When you owe more on your finance than your vehicle is current worth it’s often referred to as negative equity. Whilst the most popular finance term is 5 years, many car owners decide to change after 2 or 3 years or even sooner, depending on their circumstances. This increases the chance of the individual owing more than what their car is worth. For example, your car is worth £7,000 but you owe £9,000 on your finance agreement, therefore there is £2,000 negative equity.

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What Are My Options?

Part Exchange

If you’d like to change your car early and you have negative equity, we’re still more than happy to help you arrange finance on your next car. Any negative equity will be carried over and added to the balance. We will also settle the finance on your part exchange on your behalf.

Use our simple finance calculator to work out how far your budget will go.

Let’s say you decide to buy a car that has a price of £9,000 and you carry over £2,000 from your part exchange, you will, therefore, be financing £11,000, all of which is subject to the rate of interest determined by the finance company.

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Selling Your Car

If, for example, you start a new job that offers a company car and have no need for your current car, you can simply sell your car to us or any car buying service. We can settle the finance on your behalf, but you would have to have funds available to pay off the negative equity. You may be able to pay this on a credit card, if you wish (check that you can do this beforehand. There may be an additional charge to do so). Alternatively, you could take out a personal loan to cover it, which may be the cheaper option.

Selling privately is not an option, unless you settle the finance first. Again, you could take out a personal loan, subject to eligibility, though you may find this to be a more expensive option depending on the rates provided.

Sell your car to The Car People

Can I hand the car back to the finance company?

Some finance agreements give you protection through the Halves & Thirds Rule. Under these types of agreements you will have the option to voluntary terminate your agreement as long as you have paid over half of the total amount of your agreement (deposit and payments).

This will be noted on your agreement, but it’s always best to check your situation thoroughly to ensure this is the best option for you.

Contact The Car People for more information

Author Bio


By Steven Shields, Social Media Executive & Content Writer for The Car People.

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