Bankrate Auto Loan Calculator With Trade In Negative Equity

Auto Loan Payment Formula:

\[ P = \text{price} + \text{tax} + \text{fees} - D - \text{trade\_value} + \text{owed\_on\_trade} \] \[ PMT = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

Vehicle Price:

Tax:

Fees:

Down Payment:

Trade-in Value:

Amount Owed on Trade:

Interest Rate:

Loan Term:

months

Monthly Payment:

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1. What is the Auto Loan Calculator?

This calculator helps determine monthly payments for an auto loan when trading in a vehicle with negative equity (when you owe more than the trade-in value). It accounts for all costs associated with the new vehicle purchase and rolls the negative equity into the new loan.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

\[ P = \text{price} + \text{tax} + \text{fees} - D - \text{trade\_value} + \text{owed\_on\_trade} \] \[ PMT = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( P \) — Principal loan amount
\( PMT \) — Monthly payment
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Number of payments (loan term in months)
\( D \) — Down payment

Explanation: The formula calculates the fixed payment needed to pay off the loan principal plus interest over the specified term.

3. Understanding Negative Equity

Details: Negative equity occurs when the trade-in value is less than the amount owed on the vehicle. This difference is added to the new loan amount, increasing both the principal and total interest paid.

4. Using the Calculator

Tips: Enter all dollar amounts accurately. For the interest rate, use the annual percentage rate (APR) offered by your lender. The loan term is typically 36-72 months for auto loans.

5. Frequently Asked Questions (FAQ)

Q1: What is negative equity in a car loan?
A: Negative equity means you owe more on your current car loan than the car is worth. This difference gets added to your new loan.

Q2: How does negative equity affect my new loan?
A: It increases both your loan amount and total interest paid, resulting in higher monthly payments.

Q3: Is it better to pay off negative equity separately?
A: If possible, paying the difference separately avoids increasing your new loan amount and saves on interest.

Q4: What's a typical auto loan interest rate?
A: Rates vary by credit score, lender, and market conditions. As of 2023, rates range from 3% for excellent credit to 15%+ for poor credit.

Q5: How can I reduce negative equity impact?
A: Make a larger down payment, choose a shorter loan term, or wait until you've paid down more of your current loan before trading in.