Have you ever been to a dealership and they told you that you have $3000 or more, of negative equity? Then they say, don't worry about it, we will take care of it. And you say "ok". Well do you really know what negative equity is? Do you ask? Who pays for it? Do you ask, or do you just take the salesman's word that it will be "handled". Well this will explain briefly how negative equity hurts you.
Negative equity means that the car you are driving is not worth what the payoff is. For instance, if your payoff is $12,000 and your car's trade value is worth $8000. Then you have $4000 of negative equity. The dealership will pay off the $12,000, but they charge YOU the $4000. It's added to the price of your new car. So the car the you are paying $20,000 for, just went up to $24,000! Now the bank may not loan you $24,000 on an $20,000 car without $4000 down to cover your "negative equity". But the salesperson didn't tell you that. So your goal is to not roll over negative equity. You get negative equity by paying too much for a car.
This is just a tip on negative equity. If you need help buying a car, and not dealing with "negative equity", we are here at "Let's Go Buy A Car" to help solve those problems!