Why “Negative Equity” Might Just Work in Your Favor

Navigating the world of automotive market timing can be complex, and you may have encountered the term “negative equity.” According to Edmunds, negative equity is on the rise, but for savvy car buyers, this isn’t necessarily bad news. Understanding negative equity could unlock opportunities, especially when purchasing a high-quality used vehicle.

Negative equity, often called being “upside down” on a car loan, occurs when a vehicle is worth less than the outstanding loan balance. In simple terms, when a person owes more on their vehicle than its current value, they have negative equity.

Several factors can lead to negative equity, such as a new vehicle’s depreciation, long loan terms, or rolling previous auto loan balances into a new loan. While this might sound negative, it can also be a positive indicator for buyers in the used vehicle market.

Surges in negative equity often coincide with an increased supply of used vehicles.  When supply increases, prices generally come down due to market forces and buyers can be more selective, finding vehicles that meet their needs without compromising on price or quality.

Notice we mentioned used vehicles instead of new ones? That’s because new vehicles usually depreciate significantly as soon as they’re driven off the lot. By buying used, you avoid this steep depreciation. While your used vehicle will still depreciate over time, maintaining it well and having it regularly serviced can help retain its value.

In essence, negative equity might sound daunting, but its presence can signal great opportunities in the used vehicle market. 

CarShop aims to provide the best overall value on your next vehicle, with our best price always marked upfront – often hundreds to thousands under KBB.  We offer a wide range of vehicles, from Certified choices to Select vehicles, all of which are top-quality. We provide complimentary CARFAX reports for added peace of mind. Additionally, we offer flexible financing options, working with over 20 different lenders, and a payment calculator right on our website.

So, with negative equity on the rise, it might be the perfect time to search for your next like-new vehicle, as shopping used at CarShop can save you thousands.