How to Calculate Your Car's Equity Position
Car equity is simply the difference between your car's current market value and the amount you still owe on your loan. If your car is worth more than you owe, you have positive equity. If you owe more than it's worth, you have negative equity.
The Simple Formula
Current Car Value - Remaining Loan Balance = Your Equity
Let's look at two examples:
| Scenario | Car Value | Loan Balance | Equity | Type |
|---|---|---|---|---|
| Example 1 | $15,000 | $5,000 | $10,000 | Positive |
| Example 2 | $15,000 | $18,000 | -$3,000 | Negative |
In the first example, you have $10,000 in positive equity that belongs to you. In the second, you're underwater by $3,000, meaning you owe more than the car is worth.
Finding Your Car's Current Value
Use free online tools to estimate what your car is worth today. Kelley Blue Book, Edmunds, and NADAguides all let you enter your vehicle's year, make, model, mileage, and condition to get a market value estimate. Be as accurate as possible with mileage and condition for the best estimate.
Finding Your Loan Balance
Contact your lender directly or log into your online account to find your current payoff amount. This is the full amount needed to pay off your loan today, not just the remaining balance on your last statement.
Why Your Equity Changes
Two forces work against each other throughout your loan. Every payment you make reduces your balance and increases your equity. At the same time, your car loses value through depreciation, which decreases your equity. Early in your loan, depreciation usually wins and your equity stays low. Later in your loan, your larger payments outpace depreciation, and your equity grows faster.
Why Equity Matters
Knowing your equity position helps you make smart decisions about selling, trading in, or refinancing your car. Positive equity gives you options. You could sell the car and pocket the difference, use the equity as a down payment on a new vehicle, or refinance your loan at better terms. Negative equity limits your options and means you'll owe money even after you sell the car.
Regularly checking your equity position helps you understand where you stand financially with your vehicle.