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Navigating Negative Equity, How CarmaCare Can Save The Day

Created on 3/17/2023

man looking solemn in car

For many car owners, the thought of being in a "negative equity" situation is daunting. This occurs when the outstanding balance on your car loan is higher than the current market value of the vehicle. In a market where interest rates are sky high, and vehicle's are more expensive than ever, negative equity has become a major cause for concern. In this article, we will explore the benefits of having a CarmaCare plan and how it can support you in navigating negative equity.

The Perfect Storm

Record high new and used vehicle prices, material rate increases that put the average new car APR at 8.97% and the average used car APR above 13%, along with loan terms stretching out as far as 84 months, have left car owners holding the bag. Car prices have come in, high APR’s are locked in and 8 year auto loans have created a massive spread between the vehicle's value and the amount of money the car owner still owes.  

This leads to an even longer average vehicle age which will climb well north of 12.2 years, given that car owners underwater can't buy a new car without selling their current car.  

Understanding Negative Equity for Car Buyers

Before diving into the advantages of a CarmaCare plan, it is essential to understand negative equity. When you purchase a new car, its value starts to depreciate rapidly. In some cases, this depreciation rate is faster than the rate at which you're paying off your car loan, leading to negative equity. This situation can be problematic if you decide to sell or trade-in your car, as you may still owe money on the loan even after the sale.

Benefits of a CarmaCare Protection Plan

*Reducing Unexpected Repair Costs

CarmaCare covers the cost of major mechanical repairs that are not typically included in standard warranties. With this protection, you can avoid hefty repair bills, which can help you pay down your loan faster, reducing the likelihood of negative equity.

*Prolonging Your Vehicle's Lifespan

Regular maintenance is crucial for retaining your car's value and extending its lifespan, you can find a good resource here via AAA. 

By making car repairs more affordable via low-cost monthly payment options, a CarmaCare plan ensures that your vehicle receives the necessary care to keep it running smoothly, ultimately minimizing depreciation and the risk of negative equity.

*Enhancing Resale Value

A transferable CarmaCare plan can be an attractive selling point for potential buyers. If you decide to sell your car, the added protection may increase its resale value, helping you recoup more of your initial investment and reduce any negative equity.

*Peace of Mind

Knowing that your car is protected by a CarmaCare plan offers peace of mind, especially in the face of potential negative equity. It allows you to focus on enjoying your vehicle and making regular payments to decrease your loan balance, without the added stress of unexpected repair expenses.

In conclusion, owning a protection plan is particularly beneficial for those concerned about negative equity.

By reducing repair costs, prolonging your vehicle's lifespan, enhancing resale potential, and providing financial relief in the case of a total loss, a CarmaCare plan can help you navigate the challenges of negative equity with confidence.

Secure your investment and enjoy the peace of mind that comes with comprehensive protection by choosing CarmaCare today.