Owe more than your car is worth? See the real numbers first.

You can sell a car with negative equity, but the sale only settles once your lender is paid the full payout figure. Our offer goes toward that figure, and the gap between the two has to be covered before settlement. Get your payout figure and a genuine offer first, and you will know the size of that gap before you commit to anything.

This page explains what the gap is, how to measure it, how it is covered when you sell to us, and where to get free help if you can’t cover it. It’s general information, not financial advice.

What negative equity means

Negative equity means your loan payout figure is higher than what a buyer will genuinely pay for the car. If your payout figure is $30,000 and the best offer is $26,000, you have $4,000 of negative equity. People also call it being “underwater” on a car loan.

It is easy to end up here, and it is rarely the result of one bad decision. Three things cause most of it:

• The loan started out bigger than the car’s value. Loans can include on-road costs, fees and add-ons. In its June 2026 review of car loans, ASIC found the price paid for financed cars was often significantly higher than the lender’s own verified “book value”. The eight lenders it reviewed had average loan-to-valuation ratios between 94% and 127%, and anything over 100% means the loan was bigger than the car’s appraised value.
• The car loses value faster than the loan shrinks. A near-new car usually loses value fastest in its first few years, which is also when more of each repayment goes to interest rather than the balance.
• A balloon payment. A balloon keeps repayments lower by leaving a lump sum at the end, so more of the loan is still owing when you want to sell.

Moneysmart’s own example shows where this can lead. Eva borrowed $32,000, including fees, to buy a $30,000 car, so she owed more than the car cost from the first day. A year later she still owed $24,000. When she fell behind, the bank repossessed the car and sold it for $20,000. After $1,500 of repossession and sale costs, she still owed $5,500, with no car. The full example is on Moneysmart’s page about repossessed cars.

The lesson is simple: negative equity doesn’t disappear when the car goes. Whoever ends up with the car, the lender is owed the full amount.

Work out your gap before you decide

Two numbers decide it, and both need to be real.

1. Your payout figure. Ask your lender for a payout letter dated for the day you expect the sale to settle. Our guide to car loan payout letters explains each line.
2. A genuine offer. An online estimate is a guess. Use a figure from a buyer who is ready to pay it.

Then subtract one from the other. Our car equity calculator does the sum for you. Here is how it looks with made-up numbers, which are not a valuation or a quote for any car:

Three things can move that gap before settlement. Each repayment you make lowers the payout figure. A payout figure that expires before settlement adds more interest. And a fixed-rate loan may add an early exit fee, while Moneysmart says variable-rate car loans usually don’t have one.

How the gap is covered before settlement

With a secured car loan, the lender usually registers its interest in the car on the Personal Property Securities Register (PPSR) until the loan is paid in full. That’s why the whole payout figure has to reach the lender before the car can change hands free of finance. Our guide to finance on the PPSR after a payout explains what happens to that record.

When you sell to us, the order looks like this:

Cars under finance usually take 2 to 3 business days to settle. The money for the gap can come from savings, help from family or a separate loan. If you’re thinking of borrowing it, ask the lender for the total cost and only take on repayments you can afford.

Questions to ask your lender first

Call your lender before you accept any offer, and ask for the answers in writing:

1. What is my payout figure for my expected settlement date, and how long is it valid?
2. Is there an early exit fee, and is it included in that figure?
3. Do I need your permission to sell the car?
4. Can the buyer pay you directly, and how do you want any shortfall paid?
5. Once the loan is paid out, how long until your interest is removed from the PPSR?

The National Debt Helpline says that when you sell a car under finance, you must tell the buyer it’s under finance and get your lender’s permission.

When selling still makes sense

There is no single right answer. This is how the common situations compare.

Waiting doesn’t always help. Repayments lower the payout figure, but the car keeps getting older and adding kilometres. Recheck both numbers before you decide either way.

If you can’t cover the gap

You don’t have to work this out alone, and help is free.

• Your lender’s hardship team. Moneysmart says the first step is to contact it, and that options can include a payment plan or changes to your repayments. Only agree to an amount you can afford.
• Time to sell. In its June 2026 review, ASIC said lenders could do more to tell customers in hardship about options such as time-to-sell arrangements. Ask yours whether it offers one.
• The National Debt Helpline. Call 1800 007 007 on weekdays, or use its live chat, for free, confidential advice from a financial counsellor.
• Don’t ignore a default notice. Moneysmart says to act fast and talk to your lender or get free legal advice immediately.

Handing the car back doesn’t clear the debt either. Moneysmart says that if you surrender the car and the lender sells it for less than you owe, you still have to pay the rest. Our guide for anyone behind on car repayments walks through each option.

Selling a car with negative equity to us

The useful first step is a real number. Sell Your Car Australia is run by Autohaus Australia Pty Ltd, a NSW licensed motor dealer (MD 077404), and we buy cars, utes, SUVs and 4WDs 2021 or newer with 100,000 km or less, anywhere in Australia. If yours is older or has more kilometres, send it through anyway and we will tell you straight away if we can help.

The valuation is free and there is no obligation. You get a genuine offer by phone and see it next to your payout figure, so you can take the numbers to your lender or a financial counsellor before you decide. If you go ahead, we deal with your lender directly, the gap is covered before settlement, and the car is collected only after the sale has settled. If it turns out you have equity rather than a gap, our page on selling a car under finance explains how the money left over is paid to you. Call 1800 73 55 73 to start.