Ideally, when it’s time to upgrade or sell your used car for cash, you would have a zero balance and be free and clear from auto financing. However, that’s not always the case. In some cases, vehicle owners may owe more than their used car for sale is worth. Can you still trade in your used car, Jeep, SUV or truck with negative equity? While the answer is “yes,” there are a few things to consider.
What is Negative Equity?
Basically, negative equity refers to the fact that you owe more than what your used truck for sale is valued. For example, if you owe $4,000, but the estimated trade-in value of your car or minivan is $2,000, this means that you have $2,000 in negative equity.
Not everyone is able to pay the remaining balance. This doesn’t mean, though, that you can’t trade in your used car for sale. But, proceed with caution and know your options. Here are more tips on trading in your car.
Options for Trading in a Used Car With Negative Equity
You do have some options when it comes to trading in a used truck with negative equity.
- Roll Over the Negative Equity: When trading in a used car at a dealership, most of the time vehicle owners receive a credit for their trade-in. However, when you have negative equity, you won’t necessarily be denied an auto loan. Instead, car dealerships will commonly roll over your negative equity into your new auto loan. What this means is that you will still be paying off the negative equity from your used car for sale you traded in, as well as the amount owed for your new vehicle purchase. Taking this option with your used car for sale means that you will be paying interest on both vehicles. Rolling over negative equity for a used car for sale could also increase the interest rate on your new auto loan if the lender determines the loan is high risk. This option also makes it difficult for you to obtain positive equity in your new vehicle for the first few years of the loan, if not longer.
- Purchase an Inexpensive Used Car for Sale: Unfortunately, when you have negative equity in a vehicle you want to trade in, you may have to downgrade your preferences and purchase a less expensive used truck for sale. Purchasing a used car for sale versus a new car for sale may allow you to build positive equity faster when rolling over negative equity into a new auto loan. On average, new vehicles depreciate faster, which means purchasing a used car for sale could ultimately lower your interest rate and your payment, even if you roll over negative equity with a used car for sale.
- Pay Off the Negative Equity in a Used Truck for Sale: If you have money at your disposable, it may be a wise financial decision to pay off the negative equity before purchasing a new or used Jeep for sale. This option alleviates the need to roll over negative equity into a new car loan and can help you to acquire a better interest rate for a new auto loan. You’ll be free and clear when shopping for a new or used car for sale. If you take this option, do your research. Estimate the trade-in value of your used car for sale by entering the VIN or specs on sites such as Kelley Blue Book, Edmunds and NADA Guides. It’s also a good idea to get preapproved for an auto loan before shopping for a new or used car for sale at a car dealership to save money and time.
- Refinance Negative Equity Into a Personal Loan: If you have good credit, it may be possible to acquire a personal loan for the negative equity you have in your current vehicle. For example, if you have $2,000 in negative equity, your local bank or credit union may allow you to borrow this amount at a low interest rate. This option can help you keep the positive equity in your new vehicle and save you money on interest long-term.
- Wait to Trade-In a Used Car For Sale With Negative Equity: It may serve you well financially to wait until you’ve paid off your current vehicle versus refinancing or rolling over negative equity. If you are not in need of a newer vehicle right away, this option makes smart financial sense.
Don’t Trade It In
One of the best alternatives to trading in a used car or trading in a vehicle with negative equity is to NOT trade it in at a car dealership. Instead, consider the benefits of working with Don’t Trade It in. We are a nationwide, premier car-buying firm who prides itself on providing consumers with fair values for their used cars for sale. And, we can provide you with cash upfront to pay off your existing car loan.
Whether you have a used truck for sale, a used Jeep for sale or a used minivan for sale, simply log onto our website, upload photos and vehicle information on our online form and our team will promptly get back to you with a fair-value offer for your used car for sale. We get it. It’s tempting to trade in a car at a local dealership, but in the long run, you’re probably going to lose more of your hard-earned cash. Let Don’t Trade It In indulge you with a fair value for your used car for sale that allows you to upgrade to a premium model, pay off some bills or take that vacation you’ve dreamed of taking.