what if you still owe $$$ on a car but want to trade it in for a different car?

[gregshin]

does the balance that you owe carry over to the newer car?

 

[jlee75]

no. it's a freebie. of course you still owe the money on that other car.

 

[Maverick]

I'm confused...so you just stop making payments on the old car and start making payments on the new one?

 

[dirtboy]

I believe, if your credit is good enough, they will just give you a bigger loan. Of course, it depends on how much you owe.

 

[CPA]

More technically, if you find a dealer who will pay off your old car you needn't worry about that lien any longer, BUT you will most likely not get any trade-in value for your old car (you are most likely upside down on the note), therefore paying a lien close to the negotiated price.

 

[Vic]

The majority of auto lenders do not allow negative equity on a trade-in, so creative financing is required in those cases.
Let's say you are buying a car for $20k and trading in a car worth $7k, but you owe $9k on it. The dealer will give you $9k credit for the trade-in, but then sell you the new car for $22k. The money doesn't disappear, it stays the same, including the fact that (just like if you sold the car yourself for less than you owed on it) you will probably have to come up with that extra $2k in cash unless you have very good credit.

 

[Ameesh]

Originally posted by: Shiva112
I'm confused...so you just stop making payments on the old car and start making payments on the new one?

no i think they just give you the new car for free cause your trading in a car.

 

[rufruf44]

Originally posted by: PSYWVic
The majority of auto lenders do not allow negative equity on a trade-in, so creative financing is required in those cases.
Let's say you are buying a car for $20k and trading in a car worth $7k, but you owe $9k on it. The dealer will give you $9k credit for the trade-in, but then sell you the new car for $22k. The money doesn't disappear, it stays the same, including the fact that (just like if you sold the car yourself for less than you owed on it) you will probably have to come up with that extra $2k in cash unless you have very good credit.

True. You can't just trade in your old car with a loan balance (and continue making the old payment) due to the lien. All dealer has dealt with this situation before and they should be able to provide you with some kind of financing. Just be very careful with the terms, before you got suckered into a unfavorable deal.

 

[GasX]

The correct answer to your question is:

wtf are you thinking?

Payoff your loan before getting a new car. Being upside down on a rapidly depreciating asset is very poor financial mangement.

 

[kranky]

Wait a minute.

The thing you didn't mention is: is the resale value of the car you now have GREATER than the amount you still owe? If so, you have no troubles.

 

[FoBoT]

Originally posted by: Mwilding
The correct answer to your question is:

wtf are you thinking?

Payoff your loan before getting a new car. Being upside down on a rapidly depreciating asset is very poor financial mangement.

good answer

you are better off living with the old car, tough it out for a few more years until you owe less than its worth, before you think of buying another car you can't afford


good luck!

 

[ggavinmoss]

Originally posted by: jlee75
no. it's a freebie. of course you still owe the money on that other car.

Haha. BURN!

-geoff

 

[dullard]

Originally posted by: Mwilding
The correct answer to your question is:

wtf are you thinking?

Payoff your loan before getting a new car. Being upside down on a rapidly depreciating asset is very poor financial mangement.

I was just about to post the same thing. Here are the two most important rules-of-thumb for car buying:
1) If you cannot pay off the car loan in 3 years, you cannot afford the car.
2) If you don't want your car for more than 3 years, then don't buy it - either it is the wrong car for you or you should lease it.
Anyone in your situation probably broke one or both of those.

 

[vi edit]

The most that many banks/loan companies will loan you is 110% of the value of the vehicle you are buying.

Example:

Value of car you want to buy: $10,000
Value of trade in: $9,000
Amount owed on old vehicle: $10,000
You are upside down $1,000, and will have to have $11,000 financed(assuming no money down).

This is at the upper end of the loaning scale that banks will do. You are right at 110% of the value of the newer car that is under loan.

 

[ElFenix]

you finance the gap along with your new ride.

 

[aphex]

Originally posted by: ElFenix
you finance the gap along with your new ride.

Yep, my dad did that once... The negative equity was just added into the financing...