Financial and Customer Affairs Authority of Saskatchewan

Financial and Customer Affairs Authority of Saskatchewan

FCAA is Saskatchewan’s financial and customer marketplace regulator.

Negative Equity

do you need to trade in your present automobile? Can you nevertheless owe cash on it? Be mindful, as dealing with extra debt may place you in an undesirable position that is financial. Customers who roll their car debt into a brand new loan may end up in a posture referred to as negative equity: owing more income on a car as compared to automobile may be worth.

Here are a few ideas to think about when buying a car in order to prevent equity that is negative.

Focus on the total cost down low monthly payments spread away over a longer time of time provide the impression of affordability, but actually represent a greater cost overall. A minimal payment that is monthly seem appealing, but leads to a longer payback term with increased fees attached.

When buying an automobile, don’t focus on the lowest payment that is monthly. Understand the cost that is moneytree reviews – total of loan, such as the cost of the car and also the interest you are going to spend. Interest on an automobile with low monthly obligations could cost more when you look at the long term.

As an example, the monthly payments shown below demonstrate two loan that is different. In the event that you consider the amount of the word, interest paid therefore the total expense; Option B costs far more with the long term.

choice A choice B
Economy Car Economy Car
Price: $22,000 cost: $22,000
36 thirty days term 72 month term
5% APR 5% APR
$659/month $354/month
Interest paid: $1,736 Interest paid: $3,510
Total price: $23,736 Total price: $25,510