Negative Equity: The Facts

Negative Equity: The Facts

into the automotive industry, we often encounter a scenario we call “Negative Equity”. I was thinking it had been essential to publish a write-up about it now because a lot of customers may possibly not be conscious that banking institutions tend to just take a tough glance at clients obtaining car and truck loans if they are carrying negative equity, specially during difficult economic times.

To simply help explain exactly what negative equity is, why don’t we have a look at this situation: a customer makes a dealership and decides to buy their very first vehicle that is new! They want funding so they use and obtain authorized! To help keep re payments low, they use the longest term at 96 months money tree near me. Fortunate buyer!

Fast forward to couple of years later: the customer views a car that is new simply have to have! More great features, better efficiency, you label it! Therefore the buyer heads back into a dealership with an idea to trade inside their two-year vehicle that is old then fund brand brand new.

Now, let’s hypothetically say the two-year old automobile being exchanged in is just well worth a worth of $20,000; nonetheless, the customer nevertheless owes $25,000 into the bank because of their current loan. The customer must then make an application for a loan that covers the complete funding of the vehicle that is new the $5,000 still owing to their past car. This $5,000 then efficiently becomes “Negative Equity”. Continue reading “Negative Equity: The Facts”