What is Equity

The term "negative equity" is thrown around the automotive industry often these days, especially with the recent down turn in the Canadian economy. For the average consumer to catch phrases like "negative equity", "upside down" or "buried" the full besmislene.Potrošači are often fully aware of the implications and consequences of negative equity. In a nut shell "negative equity" simply means a large value of your vehicle is less than the loan currently owed ​​to the bank. Negative equity occurs more often than you think, it will not appear on any auto loan, unless you have less than 12 months of paying off the loan in full.

Let's put theory to practice, if you're financing GM 2005 Cobalt from a dealer of new, regardless of the 0% interest rate financing, the outstanding debt may be $ 8000. The vehicle may have low mileage and has never been involved in an accident. However the market situation dictates the wholesale value of the 2005 Cobalt can only get $ 4000. In this case, the owner will be responsible for the "negative equity" of $ 4,000 if he or she decides to return it to the dealer.

Of course there are other options open to you that you can cut your losses and negative equity. For one, you can sell a car through Auto Trader, Kijiji or Cragslist. You May Ask for $ 8,000 for your car and deal with the hassle of customers knocking on your door and test drive a car. If you do not want to deal with the general public, you can also store your resale value by other dealers. Call around your local GM dealer and let them evaluate your vehicle to offer you a firm number for the trade in. Do not make the mistake of getting "a ball park figure" from the sales person over the phone, every car is unique to a certain degree, there is no precise way to evaluate vehicle value without seeing it in person.

should avoid refinance your negative equity at any cost, do not let the newer car to lure in paying for the two loans into one. This practice is dangerous and the effect of compounding interest is a complex payment. If you have negative equity on your current vehicle and do not have any luck selling the vehicle on its own. The best and only thing to do is wait, be patient do not rush to buy a newer car, because you'll soon be buried in their financing may not be able to get without declaring bankruptcy.