When it comes to any vehicle-based loan, you must be careful. The reason your lender may ask you how much equity your car has is that they might use it as collateral to secure your loan. If you miss too many payments and fail to provide an explanation, the debt you owe may be subtracted from your vehicle’s equity.  If your debt is bad enough, your car may even be repossessed and resold so that your lender can recover part of their losses.