How to Get Out of a Negative Equity Car Loan

Updated November 22, 2016

Even if your vehicle has negative equity, you can still trade out of it or sell it. You will have to put money down if selling privately. If you use a dealer, you can possible avoid money down if you are purchasing another vehicle that has significant rebates or incentives to help with your negative equity. You can possibly roll any extra money owed on your car into a new loan if you have good credit standing.

Call or visit your financing institution to determine your payoff amount. Ask the bank representative for a 10-day to 30-day payoff amount to ensure that the amount includes the per diem, or interest added daily. You can also ask the per diem amount and figure the math yourself at the time that your vehicle is sold.

Search popular Internet guides to determine what your car is worth, either for trade-in or private sale (see Resources). Do not search just one guide. Try to search several, as values vary depending on the guide. Also, visit a bookstore to look through guidebooks that automotive dealers use. You can find these books in the automotive section of the store; the books are usually pocket-sized.

Determine the cash amount needed to get out of your car. For example, if your car is worth £6,500 and you still owe £7,800, you must give your bank the additional £1,300 to release the lien for the new owner. If you plan to trade the vehicle at a dealership, your vehicle would be worth less, as trade-in amount is lower than private sale amount. Also, the dealer might be able to use rebates to cover up your negative equity and minimise your out-of-pocket expense.

If you decide to sell your car privately, advertise your vehicle and make sure it is clean and detailed before showing it. You will have to go to your lending institution with the new owner to pay off the loan amount and release the lien.

If trading in the vehicle, work with a dealership to help you offset the negative equity. Simply go to a dealer and have your car appraised. You will have to find another car to purchase, and depending on your negative equity, the dealer may have specific cars with discounts to help you out of your situation. Otherwise, you can carry over the negative equity into a new car loan.

Sign paperwork. If selling privately, give the new owner the bill of sale and any vehicle items. Some states hold a title when it has a lien but if you have the title, sign the back of it where you see "seller's information" and fill out all required information, including mileage. If trading the vehicle with a dealer and purchasing another car, bring your title and sign all paperwork as the dealer directs, including contracts and Department of Motor Vehicles paperwork.


When you are checking trade-in and private-sale values online, be sure you don't confuse the two. This is an easy mistake to make, and you might find that you advertise your car for too little or expect too much trade value from a dealer.

Things You'll Need

  • Telephone
  • Computer and Internet
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About the Author

Shanan Miller covers automotive and insurance topics for various websites, blogs and dealerships. She has extensive automotive experience, including auction, insurance, finance, service and management positions. Miller has worked for dealer sales events around the United States and now stays local as a sales and leasing consultant for a dealership.