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Negative equity car finance

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Zuto is a credit broker, not a lender. Our rates start from 9.9% APR. The rate you are offered will depend on your individual circumstances. Representative Example: Borrowing £7,000 over 48 months with a representative APR of 19.3%, the amount payable would be £205 a month, with a total cost of credit of £2,831 and a total amount payable of £9,831.

Many of us looking for car finance are trading in our current car. It’s a smart way to make sure you always have the car you need, and gives you a great starting point for your new arrangement. But what if your current car finance is in negative equity?

If that’s your situation, the good news is that Zuto could be able to help. Not all lenders will consider negative equity car finance, and if you’ve already tried speaking to some and have been declined then it can be disheartening.  We have a lot of knowledge of the car finance market, including which lenders from our panel will allow you to trade in a car that has negative equity. When you fill in an application with us, we approach our panel of lenders who consider negative equity to offer you the best arrangement possible in your circumstances.

What is negative equity?

Negative equity is when your car’s value has fallen below the amount you still have left to repay on finance. For example, if the balance you’ve left to pay on your finance is £4,000, but the value of that car is now only £3,000, then the finance would be in negative equity.

Being in negative equity can be frustrating. Fortunately, we have lots of experience helping drivers find lenders from our panel who will accommodate negative equity car finance, so they can trade in their old car and transfer the equity – along with what they owe – into a new car finance arrangement.

How to avoid negative equity?

Avoiding negative equity isn’t always possible. The best way to avoid it is by being careful when choosing the car you buy and the car finance deal you take.

If you pay full price for a new car on finance then your car may depreciate faster than you can pay it off. Paying a deposit and reviewing that any add ons are value for money, will reduce the chance of negative equity. That’s why you should always check the total amount you’re borrowing and the term against the likely rate of depreciation, and seek an expert opinion if necessary.

If it’s too late to do this and you have found that you are already in negative equity, just get in touch with our team and we’ll do our best to help you find a negative equity car finance plan that keeps you moving forward.

How do I get out of negative equity?

One way of getting out of negative equity is to simply find the funds to pay off your loan outright. Negative equity only exists when you still have a balance to pay on the finance. As soon as that balance is clear and you fully own the vehicle , then the situation is resolved. In this instance you would be starting your next car finance with a blank page.

For many of us, clearing the debt in a single sweep may not be desirable, practical, or possible. In this situation, you may find you need to trade in the car with a negative equity car finance arrangement. If you trade in your old car, any finance secured on it must be settled in full.

What are the finance options for dealing with negative equity?

Lots of lenders offer negative equity car finance, with plans ranging across standard car finance options, including PCP finance and HP finance. What you can be offered will partly depend on the kind of car finance you originally took out, and each lender will want to look at the specific terms of that loan before approving you for negative equity car finance. By applying our knowledge in car finance, our team will run the searches and help you to get your head around the options. We’ll explain clearly what you can expect to pay each month for a new car, once you’ve moved your negative equity over to a new finance agreement.


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