Defined
What Is Equity?
Equity is the difference between what your car is worth and what you still owe on the finance. If the car is worth more than the balance, that positive equity is yours to use.
Equity tells you where you stand on a car you're financing. Worth more than you owe and you have positive equity — money you can put towards your next car. Worth less and you're in negative equity, which limits your options.
How equity works
Equity = the car's current value minus your outstanding settlement figure. Positive equity can go towards a part-exchange; negative equity means you'd need to cover the gap to switch cars.
On a PCP, equity is the amount the car is worth above its balloon (GMFV) at the end — you can put that towards your next deal. The opposite is negative equity, where you owe more than the car is worth. To work it out you need your settlement figure.
A worked example
If your car is worth £12,000 and your settlement figure is £9,500, you have £2,500 of positive equity to put towards your next car.
Worked example
Frequently asked
What is equity on car finance?
How do I work out the equity in my car?
Can I use equity towards another car?
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