What Does Equity on a Car Mean?

If you are planning on selling or trading in your vehicle, you might be wondering, “What is car equity?”

Vehicle equity is the difference between the amount you owe on your auto loan and the market value of your car. If your car loan is completely paid off, then the amount of equity in your vehicle is equal to its current market value. The market value of a car refers to the price that a vehicle would sell for on the open market. Whether you are buying or selling a vehicle, it is important to understand how vehicle equity works in order to make informed decisions.

What is Positive Equity on a Car?

equity on a car

If you have positive equity on a car, it means that the value of your vehicle is greater than the amount you owe on your auto loan.

Your vehicle’s equity can fluctuate because it partially depends on the current market value of the car. Generally, the market value of a car will change over time due to many different factors, including:

  • Supply and Demand
  • Changing Economic Conditions
  • Changes in Consumer Preferences

Additionally, the production of newer models can affect your vehicle’s resale value, especially if its technology becomes outdated. Keeping your vehicle in good condition and prioritizing routine vehicle maintenance can potentially help you retain some positive equity in your vehicle over time. One of the most noteworthy benefits of having positive equity on a car is that it can give you some leverage when negotiating with a dealership during a trade-in or a sale.

Furthermore, understanding positive equity can also be beneficial if you are thinking about refinancing your car loan in order to obtain a new loan with different terms. Although you do not need to have positive equity in your car in order to refinance your car loan, it usually makes it easier to get approved and qualify for a better interest rate.

What is Negative Equity on a Car?

positive equity on a car

Negative equity on a car occurs when the amount you currently owe on your auto loan exceeds the market value of your vehicle. If you do not put enough money down and you have a longer loan term with high interest rates, your vehicle could end up with negative equity.

Additionally, if the market value of the car has depreciated quickly, but you are still paying off your car loan, then your vehicle could have negative equity. Although trading in a car with negative equity is possible, it may not be the wisest financial choice.

How Do I Know If I Have Equity in My Car?

In order to get an estimate of the amount of equity in your vehicle, you will need to learn more about its current resale value. The resale value of your car is primarily based on its age, mileage, and overall condition.

You can find out more about the value of your car by consulting with a professional appraiser at a dealership, or by checking local classified ads and online marketplaces to see what similar vehicles are selling for in your area. Your location can also affect the market value of your vehicle. If you choose to visit an appraiser, your vehicle will be inspected and appraised at the dealership, and that will take a little bit longer than researching online marketplaces like CarFax or Autotrader.

Another option is to use online car valuation websites, such as Kelley Blue Book or NADA Guides, to obtain an estimate of your vehicle’s current resale value. These websites can conveniently provide you with an estimated value based on your car’s make, model, style, current condition, and other important characteristics.

You should regularly review and track the market value of your car, as it will likely change over time. Additionally, external factors such as changes in the economy or consumer demand can impact the resale value of your car. Therefore, it is essential to conduct research and stay up to date on relevant market trends before purchasing or selling a vehicle.

How Much Equity Do I Have in My Car?

Once you know more about the market value of your vehicle, you will be able to calculate your vehicle’s current equity. To determine the current amount of equity you have in your car, subtract the total amount left on your auto loan from the current market value of your vehicle. The result of this calculation will determine whether you have positive or negative equity in your vehicle.

Will My Vehicle Hold Its Value Over Time?

As your vehicle ages, its value will usually depreciate, but there is a possibility that some of its value will be retained over time. Whether or not your vehicle will hold its value will depend on the following factors:

  • Make and Model of the Car
  • Condition
  • Mileage
  • Maintenance History
  • Market Trends

Certain vehicles, such as the Toyota Tacoma or the Honda Civic, can usually hold their value exceptionally well over time. Additionally, if you have a classic car in working condition, the value of your vehicle could potentially increase over time because it is rare, popular, and has historical significance.

Can I Borrow Against the Equity in My Vehicle?

Yes, you can potentially borrow against the value of your vehicle through a title loan. Title loans work by allowing a qualified borrower to access a portion of their vehicle’s available equity. Title loan borrowers will be required to pledge the title to their vehicle as collateral for the loan, and by doing so, they will be able to access up to 50% of their vehicle’s overall value.1 You can use ChoiceCash’s online title loan calculator to obtain an estimate of your car’s value and a title loan quote with no obligation today!1

Visit the FAQ page to learn more about the title loan application process. Click here or call 855-422-7402 to speak to a ChoiceCash title loan agent and find out if you qualify for instant pre-approval today! Qualified borrowers can choose direct deposit to get their loan proceeds in as little as 24 hours.1

Caro H.
Caro H.
Caro H. graduated from Elmhurst University in 2016 and received a BA in communications. In the past, she has authored financial and marketing content for multiple Fintech companies and real estate agents. She is currently responsible for managing the ChoiceCash content team. Although she produces engaging content for the financial education blog in her spare time, her primary focus is overseeing the article creation process to ensure the information is accurate, intelligible, and meets the strict editorial guidelines in place.