How to Determine Vehicle Equity
If your thinking about trading in or selling your vehicle, then vehicle equity is something you should know about. Having equity in your vehicle means it is worth more than you owe on it. It is easy to determine equity on your vehicle if you have already paid it off. The value of the vehicle is then considered the amount of equity you have. If you’re still paying your vehicle off, then it could be a little tricky.
The first step in finding how much equity you may have is finding out the payoff amount of your vehicle. If you own your vehicle outright, you can skip to the next step. You need to contact the lender who holds your vehicle’s title (usually the bank that your vehicle loan is through) and request a payoff amount.
Get an appraisal for your vehicle. Many people use Kelly Blue Book for this. The downside to using a service like this is the fact that Kelly Blue Book is not in the business of buying and selling cars, therefore the number they give you is not a true value on what a dealership or private buyer is willing to pay for the car.
Many factors will go into deciding how much your vehicle is worth, condition and mileage being two of the biggest factors. If your car is 2 years old with high mileage and considered “fair condition” you will be offered less money compared to the same car with low mileage in “excellent condition.” Trim level and equipment included will also be a factor. It is not always true that a fully loaded car with the highest level trim is more desirable. The market will determine which vehicles and trim levels consumers are most interested in.
Once you have an appraisal on your vehicle, take that number and subtract the payoff amount. The number you are left with is the amount of equity you have. There are many decisions you can make once you have the amount of equity on your vehicle. If you hate your car, you might consider trading in your vehicle and using the positive equity as a down payment on a new one. You can also continue making payments to increase the amount of equity you have. Also remember that time is everything; the market is constantly changing on used vehicles. In 6 months your vehicle might be worth more according to the market and vice versa.