Is this type of auto financing possible?

Question

I have a car that with a loan payoff of $17K. I would like to trade it in for a car of the same year, different model. I know my car sells for around $13K, and the car I want to trade it in for sells for around $15K, $12K after a rebate. Is it possible for someone to have a car lot pay off their loan and add the negative equity from the payoff to a new car loan? Do you have to have REALLY good credit to get this?

Answer 1

Yes you can do this. HOWEVER, unless there is something seriously wrong with the car you are in, it is a VERY BAD IDEA. You will be paying INTEREST on the NEGATIVE equity. When you want to trade again in a few years, you will have ALOT more negative equity to deal with.

Best thing you can do is to PAY DOWN the current loan. If you were to send in an extra 100-150/month with every payment, you will begin to pay down the loan quickly.

DO NOT send in double payments, or 2 coupons and 2 payments. It will not save you any money. If you could afford to send in that amount of money, do it like this: Write one check for the current amount due, and write another one for another amount. At the bottom of the 2nd check, in the "notes" or "for" line on the bottom left side of the check, write: "For Principal". What this will do is go directly to the principal of the loan, and you will end paying less in interest over the longrun of the loan.

Answer 2

Not real good credit, but the better credit score you have the lower the interest rate you'll get. When you add negative equity to a loan it raises the loan amount, yet the loan value stays the same. This puts that car loan at a higher risk than one with no negative equity. The higher the risk, the higher the interest rate. Good credit customers are a lower risk, that's one of the benifits of paying your bills on time. So if you have good credit, it makes it easier for the banks to approve you at the same rate one with a little worst credit but in a better equity position on the loan.

On new cars, the bank likes you to be 115% or less of invoice. Which means (the amount you are borrowing to buy the car, including taxes, tags and all other fees = the loan amount) To get the best terms the loan amount should be 115% of Invoice. Let's say invoice is $15,000. If your loan amount is $17,250 or less on that car, then your loan is average risk.

However if you want to add negative equity to your loan and you want to borrow $20,000 on a car with an invoice of $15,000 then the 133% loan advance is a higher risk. Higher interest comes with higher risks. Some cases customers with good credit get turned down due to the advance on the loan. Some banks will only go as high as 125% of loan value.

Try finding a pre-owned vehicle of same year and model you are looking for. We have 2006 F-150's that invoice for $32,000 and MSRP is $35,000. We have those trucks (pre-owned with like 12,000 miles on them) for only $23,000.00. You can add $9,000 negative equity to one of these and not effect it's risk factor. (the car must be considered (not in the book).) Means not in the black book or NADA. Banks do not go by Kelly Blue Book.

Good luck on finding the vehicle you really wanted. Don't do it if you dont' want your payment to go up. Adding negative equity will definately make your payment go up, escpecially if you want to get a higher trim level vehicle which is already more expensive.

Answer 3

If you have $4K negative equity, you can add that to the loan amount of the new car. If the sales price is 12K on the new car, your loan amount will be $16K. That can be done without a problem since the car stickers for $15K. It can't always be done though. IF a person wanted to put say $8K negative equity onto a new car with a sale price of $14K, that could not happen. A bank won't loan you $22K on a $14K car. They will go a little bit above sticker, but not too much.

Answer 4

Yes it is possible and very common. I worked in finance with people with credit scores that ranged from 530 to 750. In fact most of the loans I did had negative equity that needed to be rolled in to the new loan. As long as the car is somewhat newer( 2000 and up) and your credit isn't absolutely dreadful, you should have no problem

Answer 5

Yes it is possible and yes the better your credit the more likely it will be to have them do it for you. Now that thats handled lets cover this...DONT DO IT!!

You will only dig a deeper grave, the best thing to do from here is lease the vehicle you want. They are able to do the same thing (roll the negative equity) into a lease. If you are anything like me and enjoy driving a new car every couple of years and think you might change your vehicle before you pay it off the best thing to do is LEASE!!

Answer 6

It's possible but I wouldn't recommend it. Adding negative equity to a new car loan only puts you further under water. You don't have to have great credit to make it possible because you will just end up with a higher interest rate if your credit isn't as good.

Answer 7

YES
the negitive equity will be put into your new loan............meaning the difference between what you owe and what the car is worth, will be added to the new loan, it will cause your payment to go up! keep in mind, its what the car dealer says your car is worth ( what they give you as to what they actually show you)be careful what the interest rate is............what type bank, prime or sub-prime. term of loan, they will put you back into a 60 month loan............. why are you doing this? how long do you have on old loan?

Answer 8

Yes it is possible. Sometimes the dealership itself will settle the old loan. Other wise, I know that through State Farm Bank (where my car is financed) that you can get the bigger amounts applied to your current loan.

Answer 9

No, they do it all the time. The only thing is, you will be upside down when you're trying to get rid of the second car unless you plan to keep it and pay it off.

Answer 10

No the dealer will pay off your car and if you owe more than its worth add that to the fin of the new car.