Can I get car finance with negative equity?

Yes, it is possible to get car finance even if you have negative equity on a current or previous vehicle. However, it's important to understand that carrying over negative equity can have implications for your new car loan. When you have negative equity, it means that you owe more on the existing car loan than the vehicle is currently worth. In such cases, you may still be able to secure car finance, but there are a few considerations: Higher Monthly Payments: If you have negative equity, the amount you owe on the new loan will include the remaining balance from the old loan. This can result in higher monthly payments. Loan to Value (LTV) Ratio: Lenders may have specific limits on the loan-to-value ratio, which is the amount of the loan compared to the value of the car. Having negative equity can affect this ratio, potentially impacting your ability to secure financing. Interest Rates: Having negative equity may affect the interest rate you're offered. You may face higher interest rates due to the added risk associated with the negative equity.

What does negative equity mean in car finance?

Negative equity, also known as being 'upside down' on a car loan, occurs when you owe more on a car loan than the vehicle is currently worth in the market. This situation often arises when the value of the car has depreciated faster than the rate at which you're paying down the loan. For example, if you have a car loan of £15,000 but the current market value of the car is only £12,000, you have £3,000 of negative equity.

What happens if you sell with negative equity?

If you sell a car with negative equity, you will still be responsible for paying off the remaining balance of the loan, even if the amount exceeds the sale price of the car. This means you'll need to cover the difference out of pocket. For instance, if you sell a car for £12,000 but you still owe £15,000 on the loan (due to negative equity), you'll need to come up with the additional £3,000 to pay off the loan. If you're unable to cover the negative equity at the time of sale, you may have the option to roll it over into a new car loan, but this can lead to a cycle of increasing negative equity. It's important to carefully consider the financial implications of selling a car with negative equity and explore your options with the advice of a financial advisor or car finance expert.

What happens if you are in negative equity

Name: negative equity car finance
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Rates from 9.9% APR.
Representative APR of 21.9% APR

APR Example

Representative example: borrowing £7,000 over 5 years with a representative APR of 21.9%, the annual interest rate of 21.9% (Fixed) and a deposit of £0.00, the monthly would be £178.52, with a total cost of credit of £3711.20 and a total amount payable of £10,711.20. Rates may differ as they are dependent on individual circumstances'. Rates from 9.9% APR: the exact rate you will be offered will be based on your circumstances, subject to status. Quick Car Finance are a broker not a lender.

How to avoid negative equity

Take out hire purchase car finance
Pay a deposit, not full price
Look after you vehicle
Don't exceed annual mileage

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What is negative equity?

Negative equity is when your car or vehicle is worth less than the money you owe. Most car finance contracts balance out after a because the car’s value decreases at a slow rate as you pay off your loan.

Can I get car finance if I have negative equity?

If you have negative equity on your current vehicle, DO NOT PANIC!!! It doesn't have to be the end of the road. You could still get the car finance. Negative equity can help those who are looking to trade in their current car for cheaper model and combines the cost of clearing the negative equity and the cost of a new car into monthly repayments.

Use our car finance calculator to check your availability and repayment estimates.

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Negative equity and car finance

Negative equity in car finance can be a common issue for many car owners. It occurs when the value of a car falls below the outstanding loan balance owed on the vehicle. One of the main causes of negative equity is depreciation. A new car can lose a significant amount of its value as soon as it's driven off the dealership lot, which means that if you part-exchange or sell the car later on, you may owe more on the loan than the car is worth. Additionally, taking out a loan with a high interest rate or a long-term loan can also contribute to negative equity. It's important to understand the potential causes of negative equity and carefully consider your options before taking out a loan or part-exchanging your vehicle to avoid any unexpected financial burdens.

How to deal with negative equity

You can sell or trade in your car and make up the difference between the sale price and outstanding finance out of your own pocket.
You can apply for voluntarily termination. Only if you’ve paid atleast half of the total finance and are prepared to give the vehicle back.
You can apply for negative equity car finance by applying for a loan that can cover the cost of your outstanding balance and new car.

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Negative Equity Car Finance FAQs

Can I get a car on finance if I'm self-employed?: Yes, it is possible to finance a car through your business. This is commonly done through a business car loan or a business car lease. It's important to note that the availability of business car finance options and the specific terms may vary depending on your business structure (e.g., sole proprietorship, partnership, limited company) and the lender's policies. When financing a car through your business, you'll typically need to provide financial documentation for the business, such as profit and loss statements, bank statements, and potentially business tax returns. Additionally, the car may need to be registered in the name of the business.
Can you put car finance through your business?: Yes, being self-employed can potentially impact your credit score, but it's important to understand how: Income Reporting: When you're self-employed, your income may be less predictable or consistent compared to traditional employment. Lenders may consider this when assessing your creditworthiness. Verification of Income: Lenders may require additional documentation to verify your income, such as tax returns, business financial statements, or bank statements. In some cases, this process may be more detailed than for salaried employees. Impact on Creditworthiness: The effect on your credit score will depend on how well you manage your finances and meet your financial obligations. Timely payments on loans, credit cards, and other debts will have a positive impact on your credit score, regardless of employment status.
Can you get finance without payslips?: Yes, it is possible to get finance without payslips, especially if you're self-employed or have alternative sources of income. However, not having payslips may make the application process more complex, as lenders typically use payslips to verify income for traditional employees. If you don't have payslips, you may need to provide alternative documentation to demonstrate your income and financial stability. This could include: Bank Statements: Providing several months' worth of bank statements can show a steady income flow. Tax Returns: For self-employed individuals, tax returns can be a crucial document to verify income. Business Financial Statements: If you own a business, providing financial statements can help prove your income. Other Sources of Income: If you have income from sources other than traditional employment, such as rental income, investments, or freelance work, you should disclose and document these. Proof of Benefits or Pension: If applicable, documentation of government benefits or pension income can be used to support your application. Letter from an Accountant or Financial Advisor: A professional letter attesting to your income and financial stability may also be accepted. It's important to note that not all lenders may accept alternative income documentation, and they may have specific requirements. If you're applying for finance without payslips, it's advisable to discuss your situation with the lender or seek advice from a financial advisor who can help guide you through the application process.