In motor finance terms, negative equity occurs when your vehicle is really worth significantly less than your outstanding finance.

In motor finance terms, negative equity occurs when your vehicle is really worth significantly less than your outstanding finance.

Meaning

Should you want to offer the automobile through your finance contract, as well as the car may be worth significantly less than the quantity owed, you’ll need to cover the shortfall.

Negative equity explained

To describe just just just how equity that is negative in detail, let’s just just take an illustration.

Imagine you are taking away motor finance for a 36-month contract for a brand-new automobile valued at ?20,000 at mortgage of 9.6per cent APR.

Your total amount payable with interest is ?22,963.50, as well as your cost that is monthly is.

Within 30 days of driving out of the forecourt, your vehicle has Depreciated by 10% and its particular economy value is now ?18,000.

At this time, you’ve got only compensated one month-to-month instalment of ?637.87, which means that your outstanding finance is ?22,325.63.

This renders you by having a negative equity of ?4,325.63. But don’t worry – this will be normal throughout the first stages of the motor finance contract. Continue reading “In motor finance terms, negative equity occurs when your vehicle is really worth significantly less than your outstanding finance.”