Which statement about negative equity is true?

Study for the Specialist Automotive Finance Test. Use flashcards and multiple-choice questions with detailed explanations to get exam ready!

Multiple Choice

Which statement about negative equity is true?

Negative equity means you owe more on the car loan than the car is currently worth. This happens when depreciation lowers the car’s value faster than you pay down the loan, so selling the car wouldn’t cover the remaining loan balance. If the debt is less than the car’s value, you have positive equity; if it equals the value, you have zero equity; if there’s no debt, you obviously don’t have negative equity. So the statement that describes negative equity is that the debt exceeds the vehicle value.

Negative equity means you owe more on the car loan than the car is currently worth. This happens when depreciation lowers the car’s value faster than you pay down the loan, so selling the car wouldn’t cover the remaining loan balance. If the debt is less than the car’s value, you have positive equity; if it equals the value, you have zero equity; if there’s no debt, you obviously don’t have negative equity. So the statement that describes negative equity is that the debt exceeds the vehicle value.

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