Negative equity car finance

Get a car finance quote
Get a car finance quote

Check eligibility with no impact on credit score

Are you currently in a situation of negative equity with your car finance? Just like in the property market, negative equity in car financing occurs when the value of your vehicle drops below the outstanding loan balance. It's a challenge many car owners face, especially when unexpected life changes prompt the need for a new car. At Carplus, we understand the complexities of negative equity finance deals and are here to guide you through the process.

Negative equity car finance calculator

  • 36months
  • 42months
  • 48months
  • 60months

This helps you get a more accurate finance estimate

Not sure about being approved?

Check finance eligibility

Won't affect your credit score

Your estimated examples

These estimates are subject to credit checks, and may change if you do apply for finance.

Loan amount£7,500
Length of Loan60 months
Monthly payment£0
Interest rate9.9% APR
Optional final payment£0
Amount of interest£0
Total payment£0

What is negative equity car finance?

Negative equity in car finance arises when the market value of your vehicle is less than the outstanding balance on your finance agreement. It's a common scenario, especially as cars tend to depreciate rapidly in the initial years after purchase. This misalignment between car value and loan balance can create complications if you decide to trade in or sell your car prematurely, often due to unexpected life changes. Understanding this is crucial when considering any negative equity car finance deals, ensuring you're equipped to navigate potential challenges.

What causes negative equity?

Various factors contribute to negative equity in car financing. Rapid depreciation in the early years of ownership, high-interest rates, upgrading to a new car too soon, paying above market value, making modifications that don't increase the car's value, and having a low or no deposit are some common reasons. Understanding these factors is crucial when considering negative equity car finance deal.

Worried about securing car finance with negative equity?

Worried about securing negative equity car finance? At CarFinance, we've got you covered. Our process involves finding a cheaper replacement car that allows you to trade in your current vehicle. The value of your trade-in can then be used towards the new purchase, and any outstanding amount from the old loan can be financed as part of the new deal. This way, you can manoeuvre through the complexities of negative equity, securing a feasible finance arrangement for your new vehicle.

Negative equity with different finance types

Understanding how negative equity interacts with different car finance agreements is crucial for making informed decisions. Carplus breaks down the specifics of negative equity in two common finance types: Personal Contract Purchase (PCP) and Hire Purchase (HP).


PCP agreements often involve lower monthly payments, making them popular among car buyers. However, it's essential to be aware of the potential for negative equity, especially in the early years of the contract. Balloon payments, a hallmark of PCP, can contribute to negative equity if the car's value depreciates faster than expected. Carplus provides detailed insights into managing negative equity within the framework of a PCP agreement, offering solutions that align with your financial goals.


Hire Purchase (HP) agreements, on the other hand, involve a different payment structure. The borrower pays off the total cost of the car over the agreement period, with ownership transferring once the final payment is made. Carplus delves into the specifics of how negative equity can manifest in HP agreements and provides options for addressing this challenge. Understanding the nuances of each finance type is essential for making informed decisions about your car finance journey.

Apply for negative equity finance

Looking for a negative equity finance deal to buy a car of your dream? See if a car loan could be an option for you.

Learn more & apply

What to do if you have negative equity on car?

If you find yourself in a situation of negative equity, CarFinance advises you to consider your options wisely. Continuing payments if possible is one route, as the situation may improve over time. Settling the outstanding balance with your lender is another option, providing a clean slate for your negative equity car finance journey. If the circumstances require, restructuring your repayment plan or exploring voluntary termination after paying 50% (if your contract allows) can also be viable solutions. We're here to guide you through these options, ensuring you make the best decision for your financial situation.

How to get out of negative equity car finance

CarFinance offers a range of solutions to help you exit a negative equity finance deal. Whether you choose to settle the outstanding loan, continue payments while waiting for the situation to improve, opt for voluntary termination under specific conditions, or restructure your payments, we're here to support you. Our aim is to provide clarity and flexibility, empowering you to navigate through the challenges of negative equity with confidence.

Trading-in with negative equity

Considering trading in your car with negative equity? CarFinance simplifies the process by guiding you to find a cheaper replacement model. This strategic move not only lowers your monthly payments but also allows you to refinance the total outstanding amount from your old loan into a new finance deal. We operate within assessed limits on additional negative equity, ensuring a smooth transition to a more financially manageable car finance arrangement.

How to avoid future negative equity

To prevent encountering negative equity in the future, CarFinance recommends a proactive approach. Putting down a larger deposit, researching depreciation rates on models, opting for used cars with more stable values, and maintaining your vehicle in optimal condition are effective strategies. These preventative measures can significantly impact your future experiences with negative equity car finance.

Get a personalized quote from negative equity car finance specialists

Struggling to secure negative equity car finance due to a low credit score, lack of a deposit, or past financial problems? CarFinance invites you to explore our personalised finance options. Our flexible solutions cater to various financial situations, ensuring that everyone has an opportunity to drive away in their dream car. Request a quote now, and let's get you behind the wheel of your dream car, even if you're dealing with the intricacies of negative equity car finance.

Meet our car finance lenders

We work with over 15 lenders offering 100+ HP and PCP deals so that you could have the best offer.