Negative equity car finance

Negative equity means you owe more on your car loan than the car is worth. For example, if you're a few years into a finance agreement with an outstanding balance of £3,000, but your car's only worth £2,200, you're stuck with £800 of negative equity.

It's important to be aware of this when you're considering upgrading or trading in your car, as negative equity can affect your financial situation and deals available to you. Don't panic though - if you're looking to switch vehicles, there's a chance specialist lenders like us could still help! 

You can get into negative equity on your car finance for a range of reasons: 

• Depreciation: Most modern cars lose value, especially in the first few years. You might find yourself in negative equity if yours is still fairly new, or depreciates more quickly than expected. 
• Small deposits: Putting down a low deposit means you're borrowing more to cover the car, so you could owe more than it's worth early in the loan term. 
• Damage: While some wear and tear is expected, major damage caused by accidents will hurt your car's value. Or if your car's written off, you'll be in negative equity if the insurance payout doesn't cover the full remaining loan. 
• Long loan terms: Taking out car finance with longer-than-standard terms will keep you in negative equity longer, as you'll pay off the balance more slowly while your car depreciates. 
• High interest: Similarly, high interest rates will mean you're paying off more in interest and less of the loan amount - extending how long it takes to pay it off. 
• Modifications: Tweaks like turbo exhausts or bold paint jobs might make your car less desirable on the used market, dropping its value quicker than normal. 
• Early trade-in: Swapping your car early in a finance deal makes negative equity more likely, as this is when depreciation is fastest and you haven't had much chance to pay off the loan. 

We're SAF Approved by the Finance & Leasing Association (FLA), which means that all of our customer-facing employees have passed the Specialist Automotive Finance (SAF) Expert test. This ensures our team members have all the relevant knowledge to advise you on available finance products and help find the right one for you!

Many car finance deals balance out over their full term, so it's often not a problem if you stick with it. But negative equity can become a problem when you want to change your car early. You might struggle to sell or part-exchange without paying off the negative equity from your own pocket. Alternatively, you could roll the negative equity into a new deal - though not all lenders will let you. If you get into financial difficulty and start missing payments, you might be charged late fees and hurt your credit score.

The good news is there are ways to avoid or manage it ‒ and we could still help you get a new car on finance even with negative equity. We assess it on a case-by-case basis and try to be flexible!

We’re authorised and regulated by the Financial Conduct Authority (FCA).

We're committed to treating customers fairly and giving clear, honest information so you can trust us to put your best interests first every step of the way!

The cost of our car finance depends on the price of your new car, your deposit (if you're providing one), the repayment term and your credit rating. Remember, if you're hoping to roll negative equity into your deal, that will also increase your finance cost. 

Use our negative equity UK car finance calculator for a quick idea of the monthly repayments and total repayment amounts over different terms. You can get a quick quote with no cost, obligation or hard credit search. Please note this is only an estimate. 

It can be all too easy to get into negative equity, and the circumstances can be out of your control. We're not like other lenders who might automatically try to write you off. We try to look at the bigger picture of your financial situation and future plans to judge if and how we can help.

Here's why you could be in safe hands with us if you're looking for negative equity car finance in the UK:  

• You'll get an instant decision on approval
• We've bagged Best Car Finance Provider at the Consumer Credit Awards five years in a row
• We've earned the Feefo Platinum Service Award in five of the last six years
• Over 300,000 drivers have already chosen us for their car finance

We use Experian, one of the UK's top credit reference agencies, to run our credit checks. This helps us to understand your credit history, which is one of several factors we take into consideration when making a decision on your approval for vehicle finance.