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Financial and Customer Affairs Authority of Saskatchewan

Financial and Customer Affairs Authority of Saskatchewan

FCAA is Saskatchewan’s economic and customer market regulator.

Negative Equity

do you want to trade in your overall car? Would you still owe cash on it? Be cautious, as dealing with additional debt may put you in an unhealthy budget. Customers whom roll their automobile financial obligation into a loan that is new are in a posture referred to as negative equity: owing more cash on a automobile compared to the car will probably be worth.

Below are a few suggestions to give consideration to when buying an automobile to avoid equity that is negative.

Concentrate on the cost that is total month-to-month payments spread away over a longer time of time supply the impression of affordability, but actually represent a lot higher cost overall. A minimal payment that is monthly appear attractive, but leads to a longer payback term with additional fees attached.

When buying an automobile, don’t concentrate on a minimal payment per month. Understand the cost that is total of loan, like the cost of the car plus the interest you certainly will spend. Interest on an automobile with low monthly obligations could cost more within the long term.

As an example, the monthly obligations shown below demonstrate two various loan choices. In the event that you glance at the amount of the word, interest compensated plus the cost that is total Option B costs a lot more with the longer term.

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

Another point out bear in mind is the fact that your vehicle loses value the brief moment you drive it off the great deal.