Negative equity calculator: how far underwater is your car loan?
Enter what you owe and what the car is worth. You will see how big the gap is, roughly when your payments catch up with the car's value, and what rolling the gap into your next loan would really cost.
Refinance offers worth comparing
A lower rate will not erase the gap, but it can cut the payment and the interest. For reference, prime borrowers averaged 8.81 percent on used car loans in Experian data for Q2 2026.
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How this negative equity calculator works
Equity is what the car is worth minus what you owe. Use a real number for the value: a trade-in quote or an instant offer, not the asking price of a similar car on a lot. Use your lender's payoff amount for what you owe, since it includes interest up to the payoff date.
To estimate when the gap closes, the calculator walks your loan forward one month at a time. Each month your balance grows by one month of interest and drops by your payment, while the car loses value at the yearly rate you set. The first month where the balance is at or below the value is when you could trade without carrying debt forward.
The default value drop is 10 percent a year, close to the average implied by the iSeeCars five-year study cited in our car depreciation statistics, where cars lost 41.8 percent over five years. New cars fall faster, about 20 percent in the first year per Kelley Blue Book, so raise it for a car under two years old.
Rolling the gap into a new loan is priced as its own loan at the rate and term you enter, so you can see the extra payment and interest that the shortfall alone adds. The default rate is the average new car loan rate in Experian data for Q2 2026, 6.35 percent.
Worked example: $5,000 underwater
Say you owe $24,000 at 9.5 percent with a $520 monthly payment, and the best offer for the car is $19,000. You are $5,000 underwater.
If the car keeps losing about 10 percent a year, your payments catch up with its value in about 24 months. Trading after that point means no debt carried into the next loan.
Trading now instead and rolling the $5,000 into a 72-month loan at 6.35 percent adds about $84 a month and $1,026 in interest, before you pay a cent toward the new car.
What to do if you are underwater
- Wait it out if you can. The gap shrinks every month you pay, faster on shorter loans.
- Pay extra principal. Even a small extra payment each month closes the gap sooner. Ask your lender to apply it to principal.
- Refinance a high rate. If your credit has improved, a lower rate puts more of each payment toward the balance. See car loan rates by credit score for where you likely stand, then run the refinance calculator.
- If you must change cars now, pay the gap in cash if you can, and keep the next loan short so you do not end up underwater again.
- Check sell or keep before you decide. Sometimes keeping the car, even with a repair bill ahead, costs less than trading out of it.
How common this is
In Edmunds data for Q2 2026, 29.6 percent of trade-ins toward new cars were underwater, by an average of $6,884, and buyers who rolled negative equity into a new loan averaged a monthly payment of $944. See the Edmunds report.
FAQ
What does negative equity on a car mean?
It means you owe more on the loan than the car is worth. If you sold or traded it today, the sale would not cover the payoff and you would have to pay the difference or carry it into another loan.
Can I trade in a car with negative equity?
Yes. The dealer pays off your old loan and adds the shortfall to the new one. That is legal and common, but it means you start the new loan already underwater, paying interest on a car you no longer own. In Edmunds data for Q2 2026, 29.6 percent of trade-ins toward new cars carried negative equity, and the average amount owed beyond the car's value was $6,884.
Is it better to pay off negative equity or roll it over?
Paying it off or waiting it out is cheaper whenever you can. Rolling $5,000 into a 72-month loan at 6.35 percent adds about $84 a month and $1,026 in interest. Rolling over makes sense only when you must change cars now and cannot cover the gap.
How do I get out of an upside-down car loan?
Keep making payments, add extra principal if you can, and avoid trading until the gap closes. The calculator above estimates when that happens. If your rate is high, a refinance can lower the payment and the interest, though it does not change what you owe.
Does refinancing fix negative equity?
Not directly. You still owe the same balance on a car worth the same amount. What a lower rate does is put more of each payment toward principal, so the gap closes sooner. Many lenders also limit how much they will lend against a car's value, which can make refinancing harder when you are far underwater.