Glossary
Underwater (Negative Equity)
When you owe more on your auto loan than the car is currently worth.
Being underwater is most common in the first 1-3 years of a long-term loan (72+ months) or after a heavy depreciation event. Negative equity makes refinancing harder and creates a problem if you total the car without gap insurance.
Related terms
GAP Insurance
Guaranteed Asset Protection — pays the difference between what you owe and your car's value if it's totaled.
LTV (Loan-to-Value Ratio)
The loan amount divided by the vehicle's value, expressed as a percentage.
Trade-In Value
The amount a dealer offers for your current vehicle as credit toward a new one.