If you are buying a new car and trading in a used car that you still owe money on you may have negative equity. Also referred to as being upside-down in your trade. This happens when you owe more money to the finance company than your trade is worth. When this happens and you buy a new car the difference or negative equity is added to the amount you will finance on your new car loan.
How this will affect you new car payment really depends on your credit and how long you finance the new car for. For example, if you have great credit you may qualify for a 6% interest rate and a 72 or 84 month loan term. In this example your payment would increase around $14.00 for every $1,000 of negative equity.
On the other extreme is really bad credit. People with really bad credit may only qualify for a 48 month loan term and an interest rate in the 20’s. Under this scenario the new auto loan payment would increase around $25.00 for every $1,000 you are upside down.
The bottom line is that if you have negative equity and you plan on rolling the upside-down amount into your new car loan plan on paying somewhere between $15 and $25 more per month for every $1,000 in negative equity, than you would if you were not trading in the car that you are upside-down in.