Negative Equity Car Finance

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CarLoans4u is a credit broker and a lender. Our rates start from 8.3% APR. The rate you are offered will depend on your individual circumstances. Representative Example: Borrowing €6,500 over 48 months with a representative APR of 8.3%, the amount payable would be €158.68 a month, with a total cost of credit of €1,116.64 and a total amount payable of €7,616.64. If you want to buy a car, but your current car is in negative equity, you can still get a new finance deal. We explain all in our guide.


What is negative equity car finance?

Negative equity essentially means your car is worth less than the money you owe on it.

For example, if you owe €4,000 to your finance company, but the value of your car is now only €3,000, then you would have €1,000 of negative equity on your finance.

After a while, most contracts balance out, because the car's value decreases more slowly while you continue to pay off your loan at a consistent rate.

Your car can go into negative equity for any number of reasons – you might want to change cars during your loan period, or you might be struggling with payments, for example. It might even be out of your control, such as if you’ve had an accident and the insurance company only covers the car’s current value which is less than you owe.


Trading in a car with negative equity

Many of us looking for car finance are trading in our current car.

It’s a smart way to make sure you always have the car you need, and gives you a great starting point for your new arrangement. But what if your current car finance is in negative equity?

If that’s your situation, CarLoans4u may be able to help.

We’ll find the right lender

We’ll approach our panel of lenders to find those who can offer you negative equity car finance, with plans available for Hire Purchase (HP) and Personal Contract Purchase (PCP).

A deal made for you

What you’ll be offered will partly depend on the kind of car finance you originally took out, and each lender will want to look at the specific terms of that loan before approving you for negative equity car finance.

We’re here to support you

Our team will help you get your head around the options. We’ll explain clearly what you can expect to pay each month for your new car, once you’ve moved your negative equity over to a new finance agreement.


What else can I do?

As well as transferring your negative equity to a new finance agreement, there are three other simple things you can do:

1. Stick with your deal

If you can still afford your monthly payments and don't want to change your car, you can stick with your current deal. Just because you're in negative equity doesn't mean you have to panic. A lot of the time, your equity will balance itself out by the end of your deal.

2. Ask for a voluntary termination

If you've paid at least half of your total finance package, you might be able to hand the vehicle back. Speak to your finance company first, as there might be a fee or other terms such as the condition of the vehicle or mileage restrictions.

3. Pay off the negative equity

Negative equity only exists when you still have a balance to pay on your finance agreement. As soon as that balance is cleared and you own the vehicle, the situation is resolved. In this instance, you would be starting your next car finance with a blank page. However, clearing the debt in a single sweep may not be desirable, practical, or possible. You may find you need to trade in the car in negative equity in this situation. If you part-exchange your old car, any finance secured on it will need to be paid off in full.


Can I avoid negative equity?

It isn’t always possible to avoid negative equity. For example, a new car going on sale can soon affect used car values.

But there are things you can do to reduce your risk.

  • Taking out hire purchase car finance can reduce the risk of going into negative equity.
  • Do your research before choosing your car. Specific makes and models might depreciate faster than you can pay it off.
  • Pay a deposit instead of paying the full cost on finance.
  • Review any add-ons to check their value for money.
  • Check the total amount you’re borrowing and the term against the likely rate of depreciation.
  • Keep the car in good condition.
  • Stay within your agreed annual mileage limit.

If it’s too late to do this and you have found that you are already in negative equity, get in touch with our team and we’ll do our best to help you find a negative equity car finance plan that keeps you moving forward.