Negative Equity Calculator
How far the loan is ahead of the car, the month that reverses, and what it would cost to carry the gap into your next car instead.
The address carries whatever you changed, so anyone opening it sees these numbers. Nothing is saved on our side.
You are underwater by
$4,500
The car is worth $22,000 and you owe $26,500 — 17% of the loan is not covered by the vehicle. On the current schedule you surface in 1 year 7 months.
- $22,000
- $26,500
- $641
- 48 left
- 1 year 7 months
- $4,500
- 1 year 7 months
- add an extra amount
The two lines, month by month
Value falling on a curve, balance falling on a schedule. The month the second drops below the first is the month you stop being underwater.
| Month | Worth | Owed | Equity | Gap |
|---|---|---|---|---|
| 2 | $21,412 | $25,547 | -$4,135 | |
| 4 | $20,840 | $24,582 | -$3,742 | |
| 6 | $20,283 | $23,604 | -$3,321 | |
| 8 | $19,741 | $22,615 | -$2,874 | |
| 10 | $19,213 | $21,613 | -$2,400 | |
| 12 | $18,700 | $20,599 | -$1,899 | |
| 14 | $18,200 | $19,571 | -$1,371 | |
| 16 | $17,714 | $18,531 | -$817 | |
| 18 | $17,241 | $17,478 | -$238 | |
| 19 | $17,009 | $16,947 | $62 | |
| 20 | $16,780 | $16,412 | $368 | |
| 22 | $16,331 | $15,332 | $999 | |
| 24 | $15,895 | $14,239 | $1,656 |
Only the first two years are shown, which is where the gap is widest and where it closes on most loans. Depreciation is fastest early and the loan pays down slowest early — the two work against you at the same time, which is why new cars on long loans spend so long underwater.
What rolling it into the next car costs
The common answer to being underwater, and the reason people stay underwater for a decade.
Trading in today rolls $4,500 onto the new loan. On a $30,000 car at 7.5% over 48 months, that adds $109 a month and $722 of interest.
You would then be financing a car you no longer own, on top of one you do — and starting the new loan already underwater by at least that amount, before the new car has depreciated at all. Each trade compounds the last, which is how a gap that started at $4,500 becomes permanent.
The three ways out
- Wait. Keep the car past 1 year 7 months and the problem resolves itself at no cost.
- Pay the gap. $4,500 settles it today, or extra payments close it sooner.
- Carry gap insurance until the crossover. If the car is written off, the insurer pays what it is worth, not what you owe — the difference is yours, with no car.
How this calculator works
Two lines run forward together, because the answer is where they cross.
The loan balance is amortized month by month at your rate and remaining term. The car’s value declines on a compounding curve — value × (1 − d)^(months ÷ 12) — where d is the annual depreciation rate you set. The crossover is the first month the balance falls below the value.
Extra payments are simulated as a separate run of the same loop, so the two crossover dates are directly comparable — same depreciation, same rate, only the payment differs.
The cost of rolling the gap forward is priced against the replacement price you enter rather than an assumed one: it is the difference between financing that car and financing that car plus your shortfall, at the same rate and term.
What is assumed
- A constant annual depreciation rate, applied smoothly. Real curves are steeper at the start.
- The scheduled payment made every month, on time.
- No accident, no unusual mileage, no change in condition.
- The replacement loan at the same rate and term as the current one.
A worked example
A car worth $22,000 with $26,500 owed at 7.5%, 48 payments left, depreciating 15% a year.
| Equity today | 22,000 − 26,500 |
|---|---|
| Share of the loan uncovered | 4,500 ÷ 26,500 |
| Monthly payment | $26,500 at 7.5% over 48 |
| Balance drops below value in | Month 19 |
| Rolled into a $30,000 loan | Adds $4,500 of principal |
| Extra interest from rolling it | 108.80 × 48 − 4,500 |
Nineteen months of ordinary payments fixes this for free. Trading in today instead costs $108.80 a month and $722.40 of interest — and leaves the new loan starting $4,500 underwater before the new car has lost a dollar of its own.
The $722.40 is the visible cost. The invisible one is larger: the replacement car will itself depreciate faster than the new loan amortizes, so the position at month nineteen of the next loan is worse than the position you were trying to escape. Doing this twice is how people end up carrying five figures of debt against a car worth half of it.
Questions people ask
That you owe more than the car is worth. It happens because depreciation is fastest in the early years while a loan pays down slowest in the early years — the two work against you at the same time. A small down payment, a long term, or rolling a previous loan's shortfall into this one all make it worse and last longer.
Because you might not get a choice. If the car is stolen or written off, the insurer pays what it was worth, not what you owe, and the difference is a debt you still have with no car to show for it. Being underwater is a risk you are carrying whether or not you plan to sell, and it is exactly what gap insurance exists to cover.
It is almost always the expensive answer. The shortfall gets added to the new loan, so you finance a car you no longer own on top of one you do, and you start the new loan already underwater by at least that amount before the new car has depreciated at all. Each trade compounds the last, which is how a manageable gap becomes a permanent one.
Three ways, in order of cost. Wait — the gap closes by itself as the loan amortizes faster than the car depreciates. Pay extra against principal, which brings the crossover forward; the calculator above shows by how much. Or settle the shortfall in cash if you need to sell now. Refinancing a shorter term also helps, because it accelerates principal.
It is worth having for as long as you are underwater and not much longer, which is what the crossover month above tells you. It is often cheaper from your own insurer than from the dealer, and if you bought a policy that runs the length of the loan you may be able to cancel it for a partial refund once you have positive equity. Check the policy rather than assuming either way.
One for your specific car, from a valuation guide. Depreciation varies enormously by make, model, trim and mileage, and published averages go stale quickly — which is why this calculator asks for the figure rather than assuming one. A rough check: compare what your car is worth today against what you paid, and work back to an annual rate.
Related calculators
Depreciation is the figure you supply, and the answer moves a great deal with it — use a valuation guide for your specific vehicle. It excludes taxes and fees on a replacement purchase, and gap insurance premiums.