How to Calculate Your Car's Equity
Your car's equity is straightforward: it's your vehicle's current market value minus the amount you still owe on your loan. If your car is worth $15,000 and you owe $10,000, you have $5,000 in equity. This number matters because it determines whether you can refinance and how much you might save.
Steps to Calculate Your Equity
Step 1: Find Your Remaining Loan Balance
Check your loan documents or contact your lender directly. Your current statement shows exactly what you owe. Some lenders also have online portals where you can see this instantly.
Step 2: Determine Your Car's Current Market Value
Use multiple sources to get an accurate picture:
- Kelley Blue Book (KBB) offers free valuations based on your vehicle's make, model, year, mileage, and condition
- NADA Guides provides similar estimates
- Edmunds gives market values for your specific vehicle
- Local dealerships can provide trade-in estimates
Check at least two sources and average the results. According to Kelley Blue Book's 2025 valuation data, most vehicle valuations from different sources fall within 5% of each other.
Step 3: Do the Math
Subtract what you owe from your car's value. Positive number means you have equity. A negative number means you're underwater (owe more than the car is worth).
Equity Position Examples
| Your Car's Value | Amount You Owe | Your Equity | Status |
|---|---|---|---|
| $18,000 | $12,000 | $6,000 | Can refinance |
| $12,000 | $12,500 | -$500 | Underwater |
| $22,000 | $8,000 | $14,000 | Strong position |
Why Equity Matters for Refinancing
Lenders use your equity to assess risk. With positive equity, you qualify for better refinance rates because you have collateral backing the loan. Most lenders prefer seeing at least $2,500 in equity before approving refinancing. If you're underwater, refinancing becomes difficult or expensive.
According to Federal Reserve data, borrowers who refinanced with positive equity saved an average of 0.5% to 1.5% on their interest rate compared to those with minimal equity.
When to Refinance
Refinancing makes sense when you have at least $2,500 in equity and current interest rates are 0.5% or more below your loan rate. Calculate your break-even point by dividing refinancing costs by your monthly savings. If you plan to keep the car longer than that number of months, refinancing typically pays off.
Sidekick can help you track your equity position in real time, monitor market value changes for your specific vehicle, and alert you when refinancing opportunities align with current rates. This takes the guesswork out of knowing when to make your move.