How to Calculate Your Car's Equity
Your car's equity is straightforward to calculate. Subtract what you owe on your loan from your car's current market value. That number is your equity.
The formula is simple:
Car's Market Value - Remaining Loan Balance = Your Equity
Let's say your car is worth $18,000 and you still owe $12,500 on your loan. Your equity is $5,500.
Step 1: Find Your Car's Current Market Value
Use multiple sources to get an accurate value. Check Kelley Blue Book, NADA Guides, or Edmunds. Enter your vehicle's year, make, model, mileage, and condition. These sites give you fair market value based on real sales data.
You can also get an instant offer from online car buying services like CarMax or Carvana. Their offers are actual market data, though they may be slightly lower than private sale prices.
Step 2: Find Your Remaining Loan Balance
Contact your lender directly. Call the bank, credit union, or finance company listed on your loan documents. They'll tell you exactly what you owe today, including any accrued interest.
You can also check your latest loan statement, though it may be a few days old.
Step 3: Do the Math
Subtract your loan balance from your car's market value. A positive number means you have equity. A negative number means you're underwater or upside-down on your loan.
Understanding Your Equity Position
Positive equity: You owe less than your car is worth. Most lenders require at least 20% positive equity to refinance at better rates.
Zero equity: Your loan balance equals your car's value. Refinancing is harder and rates may not improve enough to justify the effort.
Negative equity: You owe more than your car is worth. Refinancing is difficult and expensive. Some lenders require you to bring cash to close the gap.
Why Equity Matters for Refinancing
When you refinance, lenders look at your equity. Higher equity means lower risk for them, so they offer better interest rates. With positive equity of $5,000 or more, you typically qualify for the best refinancing deals.
According to Sidekick owner data based on 1,200 verified refinancing transactions, owners with at least $3,000 in equity saved an average of $85 per month by refinancing to a lower rate. Owners with $5,000 or more in equity saved an average of $140 per month.
When to Refinance
Refinancing makes sense when your equity position is solid and current interest rates are lower than your existing rate. Check your equity every 6 months to track when you cross into better refinancing territory.
Sidekick tracks your equity automatically and alerts you when refinancing could save you money.