What is Car Equity?



June 3, 2024

Understanding Equity in Your Car

Owning a car can offer more than just mobility; it can be a financial asset too. One concept that car owners and prospective buyers should familiarize themselves with is "car equity" and how it can be utilized. Whether you're thinking about taking out a loan or just curious about your car's financial value, understanding car equity is essential. In this blog post, we’ll delve into what equity in a car is, how it works, and what you should consider if you plan to leverage your car's equity.

What is Equity in a Car?

In simple terms, equity in a car refers to the difference between your car’s current market value and the amount you still owe on your auto loan (if any). Positive equity means your car is worth more than what you owe, while negative equity (or being "upside-down") means you owe more than the car is currently worth.


Let's say your car is currently valued at $15,000, and you still owe $5,000 on your auto loan. The equity in your car would be:

Equity = Car’s Value - Loan Balance = $15,000 - $5,000 = $10,000

In this case, you have $10,000 in positive equity.

How Does Car Equity Work?


The first step in determining your car’s equity is to assess its current market value. This can be done through various online tools, dealer appraisals, or professional appraisals. Websites like Kelley Blue Book or Edmunds offer useful estimations based on your car’s make, model, year, condition, and mileage.

Loan Balance

Next, check your current loan balance. This information can be found through your lender's online portal, on your monthly statement, or by calling your lender directly.

Positive or Negative

Subtract your loan balance from your car’s current market value to determine if you have positive or negative equity.

Using Car Equity: What to Consider

 1. Auto Equity Loans

If you have significant positive equity, you might consider taking out an auto equity loan. This type of loan uses the equity in your car as collateral. While this can be a quick way to access cash, it’s crucial to understand the risks involved, such as having your car repossessed if you fail to make loan payments.

2. Trade-Ins

When trading in your car for a new one, the positive equity can reduce the purchase price of your next vehicle. Conversely, if you have negative equity, you might end up rolling that amount into the loan for your new vehicle, which can complicate your financial situation.

3. Selling Your Car

Selling your car privately often gets you a better price than trading it in. If you have positive equity, you'll pocket the difference after paying off your loan. Always get a few quotes to ensure you’re getting a fair price.

4. Refinancing

If interest rates have dropped or your credit score has improved, refinancing your auto loan might be beneficial. This could reduce your monthly payments or shorten the loan term, potentially building your car’s equity faster.

5. Car Secured Credit Card

Consider using the equity in your car by applying for a credit card that’s secured by your card with Yendo, for example. The equity in your car can help you secure a credit line that you can use as you wish while also potentially building your credit with responsible usage.

Factors to Consider

Interest Rates

When considering an auto equity loan or refinancing, compare interest rates across multiple lenders to ensure you’re getting the best deal.

Loan Terms

Understand the loan terms, including the repayment schedule, admin fees, and any penalties. A longer term might lower your monthly payments but increase the total interest paid over time.


Cars typically depreciate in value over time. If your car is relatively new, it might lose equity quickly compared to older cars with a slower depreciation rate.

Financial Situation

Assess your overall financial health. Leveraging your car’s equity should be part of a well-rounded financial strategy, not a quick fix for chronic financial issues.

Additional Resources

For more detailed information about car equity and related financial products, you can refer to:

- Edmunds: [Car Appraisal and Valuation Tools](https://www.edmunds.com/appraisal/)
- Kelley Blue Book: [Car Value Estimations](https://www.kbb.com/)
- Consumer Financial Protection Bureau (CFPB): [Understanding Auto Loans and Equity](https://www.consumerfinance.gov/auto-loans/)


Understanding car equity can provide you with various opportunities to leverage the value of your vehicle for financial gain or improved loan terms. However, it's essential to evaluate all aspects carefully and consider your overall financial plan. Whether you’re looking into an auto equity loan, trading in your car, or refinancing your loan, a clear understanding of car equity sets you on the right path to making informed decisions.

Disclaimer: Yendo is not a provider of financial advice. The material presented on this page constitutes general consumer information and should not be regarded as legal, financial, or regulatory guidance. While this content may contain references to third-party resources or materials, Yendo does not guarantee the accuracy or endorse these external sources.