Buying & Financing
Negative Equity Calculator
Owing more than the car is worth is ordinary — the average new-car buyer with no trade-in signs at about 102% of the car's value. What is worth knowing is how deep it goes, when it ends, and what it costs to carry an old loan into a new one.
Above water at
—
needs a depreciation rate
Loan-to-value at signing
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— — CFPB bands, below
Start with the price, the tax and fees, what you're putting down, the rate and the term — then what the car is worth today, which is the number the letter is built on.
- Amount financed
- — — a month
- The gap at signing
- —
- The deepest the hole gets
- — never underwater
- Rolled in from the trade-in
- — — of interest to carry it
- Total interest on the whole loan
- —
If the car depreciates slower, or faster
—
—
— yours
—
—
—
The crossover moves with this guess. The letter does not — it is the amount financed over what the car is worth today, and no forecast enters it. That is the reason the grade is on the ratio at signing rather than on the months you spend underwater.
Anything left blank counts as zero — no trade-in, no cash down, no fees. The band cutoffs are CFPB cohort averages (88.9%, 100%, 119.3%), not thresholds anyone has declared safe, and a B is not an endorsement of the deal. The value line assumes a constant annual rate; real depreciation is front-loaded, so the early gap here is if anything understated.
Informational only, not financial advice. This tool prices one loan against one car's value using figures you supply, including a depreciation rate nobody can know in advance. It is not an opinion on whether to sign, and it does not price GAP insurance, early-payoff penalties or refinancing — see the loan calculator for the payment side and cost per mile for what running the car costs. Nothing you type is sent anywhere; the arithmetic runs in your browser.
How this is calculated
Two lines on one axis. What you owe, falling on the loan's amortization schedule; what the car is worth, falling on a depreciation rate. The gap between them is a subtraction, and the crossover is the first month it goes negative.
amount financed = price + tax + fees − cash down − (trade-in − payoff) loan-to-value = amount financed ÷ what the car is worth today ← the letter gap at signing = amount financed − what the car is worth today for each month k: owed(k) = P(1+r)^k − M·((1+r)^k − 1)÷r r = APR ÷ 12 worth(k) = value today × (1 − depreciation)^(k÷12) gap(k) = owed(k) − worth(k) crossover = the first month gap(k) ≤ 0 deepest = the largest gap(k), and the month it lands
The amount financed is Regulation Z's construction, not ours — 12 CFR § 1026.18(b) sets out cash price less downpayment, plus other amounts financed that are not the finance charge. Tax, fees and a trade-in's unpaid balance are all in that second category. The same helper prints the payment on the Auto Loan Payment Calculator, so a figure cannot differ between the two pages.
Why the hole gets deeper after you start paying
This is the counterintuitive result, and it is entirely deterministic. Early in an amortizing loan most of each payment is interest, so the balance falls slowly. The car depreciates at full speed regardless. The gap therefore widensbefore it closes, and the deepest point is usually somewhere in the first two years rather than on the day you signed. In the 84-month example this page uses, the driver drives off $4,700 underwater and is $7,987 underwater at month 25 — about 70% deeper, after two years of paying on time. If you are planning to sell before the crossover, the number that matters to you is that one, not the one on today's worksheet.
What the letter grades, and what it refuses to
The grade is loan-to-value at signing and nothing else. Every cutoff is a published CFPB cohort mean for that exact ratio:
| Grade | LTV at signing | Where the cutoff comes from |
|---|---|---|
| A | under 88.9% | CFPB mean LTV for buyers trading in with positive equity |
| B | 88.9% – 100% | You owe less than the car is worth. 100% is not our line; it is the line |
| C | 100% – 119.3% | Underwater at signing. The CFPB's no-trade-in mean, 101.6%, sits here |
| D | 119.3% and over | At or above the CFPB mean for loans that financed negative equity |
These are cohort averages, not thresholds anyone has declared safe. What is ours is the decision to map four letters onto four figures we did not choose — the figures themselves are the CFPB's, and a B is a description of where you sit against other borrowers, not an endorsement of the deal.
The letter is deliberately not the answer, and this page proves it on itself. The 72-month example grades D and is above water at month 46 of 72. The 84-month example grades C — a better letter — and stays underwater until month 70 of 84, a larger share of its term. A single ratio at a single moment cannot see a term, and this one does not pretend to. That is also why the grade is not on the months you spend underwater: that figure moves with a depreciation rate you guessed at, and a letter that swings on your own guess is worse than no letter.
What rolling a trade forward costs
When the payoff on your old car is larger than what the dealer allows for it, the difference does not disappear — it is added to the new loan, and you pay interest on it for the whole term. This page prints that interest separately, and the split is exact rather than an allocation we invented: interest on a fixed-rate amortizing loan is proportional to principal, so a slice's interest is that slice's share of it. In the worked example, $4,000 of leftover debt carries $1,249 of interest over 72 months, on a car the driver no longer owns.
The sources
The bands, and how common this is. The CFPB's Negative Equity Findings from the Auto Finance Data Pilot (June 2024) reports mean loan-to-value by cohort: 88.9% where the trade-in carried positive equity, 101.6% where there was no trade-in at all, and 119.3% where negative equity was financed. About 11.6% of loans originated 2018–2022 included negative equity, averaging $5,073 on new vehicles and $3,284 on used. The same report is the reason the D band exists: borrowers who financed negative equity were “more than twice as likely to have their account assigned to repossession within 2 years” as those trading in with positive equity.
Current scale. Edmunds' quarterly data found 29.6% of trade-ins toward new vehicles carried negative equity in Q2 2026, averaging $6,884, against 30.9% and $7,183 the quarter before. Quoted for scale only — none of it enters your arithmetic, because a national average is not your car.
What this does not cover
A constant depreciation rate is not how cars depreciate. Real curves are front-loaded: the first year takes the largest bite. A flat rate therefore understates the early gap, which means the hole shown here is if anything conservative. We do not model the front-load because no per-model curve is ours to cite, and inventing one would put a number on this page that no source stands behind.
The value is your estimate. What the car is worth today is the denominator of the letter, and the letter is only as good as it. Type the purchase price and you will get an optimistic grade — on a new car the two diverge the moment the paperwork is signed. A KBB or Edmunds appraisal for the model, mileage and condition is the figure to use.
GAP insurance is named but not priced. The gap on this page is precisely the exposure GAP coverage is sold against: if the car is totalled, the insurer pays what it was worth, not what you owe. Whether the coverage is worth its premium depends on a quote we cannot see, so this page stops at showing you the size and the duration of the risk.
Also excluded: early-payoff penalties, refinancing, and every running cost — cost per mile is where insurance, fuel and upkeep live. This page is one debt against one asset.
Last reviewed: August 2026
Frequently asked questions
Is being underwater on a car loan actually a problem?
Usually not, and the page opens from that position rather than from alarm. The CFPB's Auto Finance Data Pilot put the mean loan-to-value at 101.6% for buyers with no trade-in at all — the typical new-car buyer is slightly underwater the day they sign, because tax and fees get financed and the car is worth less than the price the moment it leaves the lot. That resolves itself as the loan amortizes. It becomes a problem in two specific situations, and only those. The first is if the car is totalled or stolen: the insurer pays what the car was worth, not what you owe, and the difference is yours to pay on a car you no longer have — that gap is exactly what GAP insurance is sold against. The second is if you need to sell or trade before the crossover month, because you have to bring cash to close the loan, or roll the shortfall into the next one. If neither of those is on your horizon and you can make the payment, being underwater in year two is a number, not an emergency.
Why does the gap get bigger after I start making payments?
Because the two lines move for unrelated reasons and, at first, the wrong one moves faster. Early in an amortizing loan most of each payment is interest, so the balance falls slowly. The car, meanwhile, depreciates at full speed from day one. Subtract the second from the first and the gap widens for a while before it starts to close. In the worked example on this page — $32,000 car, $1,000 down, 84 months at 11%, 20% a year of depreciation — the driver signs $4,700 underwater and is $7,987 underwater at month 25. The hole is about 70% deeper after two years of paying on time, and nothing has gone wrong. This is the single most useful thing the chart shows, and it is why the deepest point is reported separately from the gap at signing: if you are planning to sell in year two, the number that matters to you is not the one on the worksheet today.
What does the letter actually grade, and what does it ignore?
It grades one ratio: the amount financed divided by what the car is worth today, at signing. Nothing else. Not the APR, not the term, not the payment, not whether you can afford it. The four cutoffs are CFPB cohort means for that exact ratio — 88.9% for buyers trading in with positive equity, 100% because owing exactly what the car is worth is the natural line, and 119.3% for loans that financed negative equity. What is ours is the decision to map four letters onto four figures we did not choose; the numbers themselves are the CFPB's. The reason the grade stops there is that everything else on this page contains a forecast, and a letter that swings on a depreciation rate you guessed at is a letter about your guess. It is also, deliberately, not the answer: the worked example on this page grades C and spends its whole term underwater, while the golden case grades D and is above water at month 46 of 72. A better letter, a worse loan.
I'm rolling negative equity from my trade into the new loan. What does that actually cost?
It costs the balance itself, plus interest on it for the whole term, on a car you no longer own. This page prints both. The split is exact rather than an estimate: interest on a fixed-rate amortizing loan is proportional to principal, so the interest attributable to a slice of the principal is that slice's share of it. In the example on this page, $4,000 of leftover debt on a 72-month loan at 9.4% carries $1,249 of interest — around 31% on top of the debt, spread over six years. There is a second cost the arithmetic here does not show: it starts the new loan deeper in the hole, which pushes the crossover month later, which makes it likelier you will be underwater again when you next trade. That is the mechanism the CFPB found on the other end of its data — borrowers who financed negative equity were more than twice as likely to have the account assigned to repossession within two years than those trading in with positive equity. Not because rolling debt forward causes repossession, but because it is what being stretched looks like on a worksheet.
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