CAN I TRADE IN A CAR WITH NEGATIVE EQUITY?
While trading in a car with a loan still attached to it isn't the best idea, it's still an option if you deem it necessary. For some, selling your car with positive equity will mean money back in your pocket you can use towards the next transaction. But if you're selling your car upside down or with negative equity, be ready to fork over a bit more than you may have thought.
But is it worth trading in your car with negative equity on your name? There are a few options to look for to keep your situation flexible, and it all starts with having an understanding of all the numbers involved.
Calculate How Much Negative Equity You Have
Before you even consider anything, the first step is to understand how much you owe on your loan. A loan of 10k will likely mean much lower negative equity than a loan of 30-40k. To calculate your equity, consider the value of your car and the loan amount you have. You can check a few reputable sites or contact your local dealer to get an evaluation of the worth of your vehicle. Once you have this, take your loan amount and find the difference. If your car is worth $20,000, but you owe $30,000, you have $10,000 in negative equity that you'd have to pay back.
Pay the Negative Equity Out of Pocket
Your first option is to just pay the negative equity out of pocket, which is much easier said than done. A small difference of $2,000 might be something you pay out of pocket, but a 10 or 20 thousand dollar difference is a lot more money to consider. You should also contact your lender and ask about the terms and conditions of paying your loan off quickly. Some lenders have a prepayment penalty built into the loan, which would add more to your payment.
Roll the Difference Over Into Your New Car
When trading in your vehicle with negative equity, a popular option is to roll the difference over into a new car. This allows you to pay down your loan on your new car without worrying about forking over the out-of-pocket cost of your negative equity. It comes at the expense of a higher payment than you would for your new vehicle but works well for smaller balances and can help get you on the road with a new car immediately, instead of worrying about the equity you have to pay back.
Consider a Private Transaction
Consider going the private route for your car sale if you find that your loan is upside down. Again, you want to make sure this is okay with your lender and you won't incur any fees or be violating any terms of the loan agreement.
Private transactions might give you a bit more cash to work with, but they might also leave you having to fill out a ton of paperwork and spending a lot more time searching for a suitable buyer and then finding yourself a new car. If you need a car ASAP or don't want to spend time going through the paperwork, a trade-in is probably your best option.
Tips for Your Trade-In
These tips can help make the process much easier for you and ease your burden, depending on which route you choose. The entire goal of the process is to get you in a new car without paying more than you need, so consider a less expensive vehicle, dealership approval beforehand, and appropriate financing to set you up for success with your new car.
Get a Less Expensive Car
The biggest way to avoid trouble is to consider getting a cheaper car. This doesn't mean your vehicle has to be unsightly. If you drive an SUV, consider getting a sedan or another vehicle that gives you more room to work with. This way, adding negative equity to your auto loan term won't be as impactful.
Get Approved Before Heading to the Dealer
Make sure your next loan terms are appropriate for your situation. Remember, even when getting a new car, your terms will still depend on your income level and credit scores. If your monthly payment or loan terms make you uncomfortable, consider other alternatives before making your decision. While trading in a car with a loan still attached to it isn't the best idea, it's still an option if you deem it necessary. For some, selling your car with positive equity will mean money back in your pocket you can use towards the next transaction. But if you're selling your car upside down or with negative equity, be ready to fork over a bit more than you may have thought.
But is it worth trading in your car with negative equity on your name? There are a few options to look for to keep your situation flexible, and it all starts with having an understanding of all the numbers involved.
Trade-In Your Car With Faulkner Buick GMC Trevose
A reputable dealer cares about your financial situation, and if trading in your vehicle is on your mind, reach out to Faulkner Buick GMC Trevose. Our dealers can help you understand how the cars you're considering affect your budget and break down the financial information you need to know. Value your trade-in, and reach out to us to begin your process and get you seated in a new car in an affordable way.
But is it worth trading in your car with negative equity on your name? There are a few options to look for to keep your situation flexible, and it all starts with having an understanding of all the numbers involved.
Calculate How Much Negative Equity You Have
Before you even consider anything, the first step is to understand how much you owe on your loan. A loan of 10k will likely mean much lower negative equity than a loan of 30-40k. To calculate your equity, consider the value of your car and the loan amount you have. You can check a few reputable sites or contact your local dealer to get an evaluation of the worth of your vehicle. Once you have this, take your loan amount and find the difference. If your car is worth $20,000, but you owe $30,000, you have $10,000 in negative equity that you'd have to pay back.
Pay the Negative Equity Out of Pocket
Your first option is to just pay the negative equity out of pocket, which is much easier said than done. A small difference of $2,000 might be something you pay out of pocket, but a 10 or 20 thousand dollar difference is a lot more money to consider. You should also contact your lender and ask about the terms and conditions of paying your loan off quickly. Some lenders have a prepayment penalty built into the loan, which would add more to your payment.
Roll the Difference Over Into Your New Car
When trading in your vehicle with negative equity, a popular option is to roll the difference over into a new car. This allows you to pay down your loan on your new car without worrying about forking over the out-of-pocket cost of your negative equity. It comes at the expense of a higher payment than you would for your new vehicle but works well for smaller balances and can help get you on the road with a new car immediately, instead of worrying about the equity you have to pay back.
Consider a Private Transaction
Consider going the private route for your car sale if you find that your loan is upside down. Again, you want to make sure this is okay with your lender and you won't incur any fees or be violating any terms of the loan agreement.
Private transactions might give you a bit more cash to work with, but they might also leave you having to fill out a ton of paperwork and spending a lot more time searching for a suitable buyer and then finding yourself a new car. If you need a car ASAP or don't want to spend time going through the paperwork, a trade-in is probably your best option.
Tips for Your Trade-In
These tips can help make the process much easier for you and ease your burden, depending on which route you choose. The entire goal of the process is to get you in a new car without paying more than you need, so consider a less expensive vehicle, dealership approval beforehand, and appropriate financing to set you up for success with your new car.
Get a Less Expensive Car
The biggest way to avoid trouble is to consider getting a cheaper car. This doesn't mean your vehicle has to be unsightly. If you drive an SUV, consider getting a sedan or another vehicle that gives you more room to work with. This way, adding negative equity to your auto loan term won't be as impactful.
Get Approved Before Heading to the Dealer
Make sure your next loan terms are appropriate for your situation. Remember, even when getting a new car, your terms will still depend on your income level and credit scores. If your monthly payment or loan terms make you uncomfortable, consider other alternatives before making your decision. While trading in a car with a loan still attached to it isn't the best idea, it's still an option if you deem it necessary. For some, selling your car with positive equity will mean money back in your pocket you can use towards the next transaction. But if you're selling your car upside down or with negative equity, be ready to fork over a bit more than you may have thought.
But is it worth trading in your car with negative equity on your name? There are a few options to look for to keep your situation flexible, and it all starts with having an understanding of all the numbers involved.
Trade-In Your Car With Faulkner Buick GMC Trevose
A reputable dealer cares about your financial situation, and if trading in your vehicle is on your mind, reach out to Faulkner Buick GMC Trevose. Our dealers can help you understand how the cars you're considering affect your budget and break down the financial information you need to know. Value your trade-in, and reach out to us to begin your process and get you seated in a new car in an affordable way.
