How Much Negative Equity Can Be Put Into a New Car?

Lending Value

The amount you can finance when rolling over negative equity into a new car loan differs by your individual credit situation and vehicle purchase price. The vehicle's lending value is based on MSRP, or the manufacturer's suggested retail price. Depending on credit, a borrower might obtain a loan approval for less or more than the car's lending value, known as a loan-to-value ratio. You'll have to apply for a loan to find out your loan-to-value ratio. Some borrowers may obtain an approval for thousands over MSRP, while others have to provide a down payment to increase vehicle equity, without negative equity allowed.

You might fare better selling your car privately instead of trading it in to a dealer. To satisfy your old loan, you'll have to provide a down payment to your lender after the car’s sales price. You'll make more money when selling your car privately. To gauge the difference in values, check appraisal websites to determine your car's trade-in and private sale value. Your vehicle might be worth thousands more, which minimizes any amount you'll pay out-of-pocket or transfer to your new loan balance. You'll also pay less in interest charges and avoid a negative equity situation in the future.

Rebates help to cover up negative equity. Although rebates are instant discounts off a vehicle's MSRP, the discounts are viewed as a down payment to lenders. If you have trouble getting a loan or are asked to provide a down payment, shop for a vehicle with large rebates and negotiate the car's sticker price to roll over more negative equity. Previous model years usually carry hefty discounts. Search online for discount information, which is readily available on manufacturer websites.

If you’re approved for a loan with negative equity, consider the interest you’ll pay on the money you carry over to the new loan. Every $1,000 financed is equal to about $22 in a monthly payment amount, which might create issues with your budget. Carrying over just $2,000 in negative equity creates an increase of over $40 per month for your monthly payment. Don’t extend your loan term to balance the difference in payment, as you’ll prolong your negative equity situation and pay more in interest.