This is certainly called negative equity, or being “upside down” on your loan.
There is actually nothing incorrect with this particular – if you intend on maintaining the vehicle and paying down the loan.
But there are occasions once you might want to trade right into a new vehicle before the mortgage is fully paid down.
In cases like this, negative equity becomes a big issue.
You may have experienced adverts where dealers claim they are able to trade you from your car “no real matter what your debt”.
They might be in a position to trade you from the car, but just what they don’t really inform you is you owe that you will still have to pay off whatever.