What is negative equity on car finance?

Negative equity means the amount needed to settle the finance is greater than the car’s current value. The shortfall still has to be dealt with rather than disappearing when you change cars.

In relation to “What is negative equity on car finance?”, the agreement is the controlling document: headline monthly payments can hide a deposit, final payment, mileage limit or settlement position that changes the real cost.

For “What is negative equity on car finance?”, equity is the difference between the car’s real trade or sale value and the finance settlement figure. Do not confuse an advertised retail price with what a dealer will actually allow in part-exchange.

For “What is negative equity on car finance?”, this answer is written for a Northern Ireland user, but some vehicle-registration, consumer-credit and insurance functions operate on a UK-wide basis. The attached sources — MoneyHelper - Personal Contract Purchase (PCP), MoneyHelper - Buying a car with Hire Purchase, and nidirect - Contact Consumerline — are therefore deliberately mixed where the responsible authority is UK-wide. That is more accurate than forcing every point into an NI-only source.

Practical next step for “What is negative equity on car finance?”: open the finance agreement and find the figures or clause relevant to this question. If you are changing or ending the agreement, request the current position directly from the finance provider before promising the car to anyone else.