What is equity on a car loan?

I hear the word "equity" thrown around a lot in financial matters. What does it mean when it comes to car loans?

Answer provided by
Eric Schad
Answered on Apr 07, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
“Very simply, the equity on a car loan is the difference between the value of the car and the amount you owe on the loan. Using this definition, you can have either positive or negative equity in your vehicle.
The longer you’ve paid toward the loan, the better the chance that you have positive equity. Negative equity, which is also known as an upside-down car loan, typically occurs during the early few years of the loan.”

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