Negative Equity Calculator

What Is Negative Equity?

Negative equity happens when your car loan balance is higher than the car’s market value.

Here is a simple example:

• You owe $18,000 on your current car
• A dealer offers $14,000 as a trade-in
• The $4,000 difference is negative equity

That $4,000 does not disappear. In most cases, it gets added to your next car loan. This is often called rolling over debt.

Why Negative Equity Is a Big Deal

Negative equity affects more than just the sticker price of your next car.

It can:

• Increase your monthly payment
• Increase total interest paid
• Push your loan-to-value ratio too high
• Make lenders reject the deal
• Trap you in a cycle of debt for years

Many buyers focus only on the monthly payment. That is where problems start.

A negative equity calculator forces the full picture into view.

What a Negative Equity Calculator Does

This calculator analyzes two deals at the same time:

1. Your current car loan
2. Your proposed new car purchase

It then shows how much old debt is being carried forward and what it really costs you.

Instead of guessing, you see real numbers.

Inputs Explained in Plain English

Current Vehicle Status

Payoff Amount
This is what you still owe on your current car loan today.

Trade-In Offer
This is what the dealer is willing to pay for your car.

Private Party Value (Optional)
This lets you compare trading in versus selling the car yourself.

If the private sale value is higher than your payoff, selling privately may eliminate negative equity.

New Car Deal

New Vehicle Price
The purchase price of the next car.

Cash Down
Money you pay upfront. This directly reduces the loan amount.

Interest Rate
The annual percentage rate on the loan.

Loan Term
How long the loan lasts, usually 48 to 84 months.

Longer terms lower the monthly payment but increase total interest.

Taxes and Fees

Sales Tax
Based on your local rate.

Dealer Fees
Documentation, processing, and other add-ons.

Trade-In Tax Credit
In many states, trading in a car reduces the taxable amount on the new purchase. This calculator accounts for that if enabled.

Key Results You Should Pay Attention To

Negative Equity (Rollover Amount)

This is the most important number.

It shows how much old debt is being added to the new loan.

If this number is high, you are financing a car you no longer own.

Total Loan Amount

This includes:

• New car price
• Taxes and fees
• Negative equity
• Minus cash down

This is the real amount you are borrowing.

Monthly Payment

This is the full payment for the combined debt.

It often looks reasonable at first. The calculator breaks it down further so you can see why.

“Zombie” Payment

This shows how much of your monthly payment is going toward the old car.

You are still paying for a vehicle that is gone.

This number surprises most people.

Interest on Old Debt

This shows how much extra interest you pay just for rolling over negative equity.

It is pure waste. No new value. No asset.

Loan-to-Value Ratio (LTV)

LTV compares the loan amount to the new car’s price.

• Under 100% is ideal
• Over 125% is risky
• Very high LTV may cause loan rejection

Banks care about this number even if buyers do not.

Visual Breakdown: Car Value vs Rolled Debt

The calculator uses a bar display to show:

• Green: value of the new car
• Red: rolled-over negative equity

If the red section is large, the deal is dangerous.

This visual makes the risk obvious at a glance.

Built-In Advice and Warnings

The calculator does not just show numbers. It explains what they mean.

Examples of verdicts include:

• Safe: positive equity applied
• Caution: part of the payment is old debt
• High negative equity: significant interest waste
• Critical risk: loan may be rejected

It also compares private sale options when available.

How to Use This Calculator the Smart Way

Before You Visit a Dealer

Run the numbers at home. Know your negative equity before anyone starts talking monthly payments.

Compare Scenarios

Try different options:

• More cash down
• Shorter loan term
• Selling privately
• Waiting longer before upgrading

Small changes can save thousands.

Watch the Zombie Payment

If a large part of your payment is old debt, reconsider the deal.

Common Mistakes This Calculator Helps You Avoid

• Trading in too early
• Focusing only on monthly payment
• Accepting long loan terms to hide debt
• Rolling negative equity multiple times

Many buyers do not realize they are financing three cars across two loans.

When Rolling Negative Equity Might Make Sense

Sometimes it is unavoidable.

Examples include:

• A car that is unreliable or unsafe
• A major life change requiring a different vehicle

Even then, the calculator helps limit the damage by showing the least harmful path.