Help me understand this............?

Question

I dont get it. Say you owe $8,000.00 on a car and its only worth $4,000.00 and you want to trade in and get a $20,000.00 car. Does your loan now become a $28,000.00 loan or a $16,000.00 loan? If so, why? What is the purpose of a trade in if you don't really get credit for it? This is something I have never really understood.

Answer 1

This will be easy to get you owe $8,000 it is worth $4,000 so you have $4,000 negative equity.Now when you go to buy another car new or used the negative $4,000 will have to carry over on the next loan in this case the loan will be for $24,000 plus the interest charge on that loan(whatever the percentage rate is).I sell cars for a living I can help you buy a car if you would like to know what your doing contact me and I'll go step for step for the way should trade your car.Good luck

Answer 2

Actually, it would become a $24,000 loan -- You owe $8,000., new car is $20,000., so total would be $28,000. But you're giving them a car worth $4,000., so subtract the $4,000. and your new loan is for $24,000. That said, however, I hope you're not going by sticker prices, book prices, etc. The combination of you're car's actual trade-in value -- $4,000. in this case -- and the many discounts, rebates, etc., that almost every dealer has at his disposal, should give you at least another couple thousand in trade-in allowance, thus bringing your loan closer to $20,000. But this depends on the specific car you're buying. Discounts and rebates vary widely -- but they're almost always present at some level. Happy negotiating!

Answer 3

Let Car you are buying = A

Let Car you are trading = Z

A = 20k Z = 4k

Subtract A - Z = 16k. We call this the Difference.

Add the difference to what you owe, Difference + 8k = 24k

Here's what's happening. The dealer is giving you 4k for your car, so they take that off the car they are selling you. However, your debt DOES NOT GO AWAY UNTIL SOMEBODY PAYS IT OFF. The dealer must then send a check to the company that owns your car, the finance company, in order to get a title. That check is for 8k. The dealer will then sell your car (hopefully) for more than the 4k in order to make a profit. This is how they make up giving you 4k for your car.

Answer 4

So if you trade your car in, and get $4,000 for it, chances are the dealer will put that $4,000 to the amount you owe on the car. So instead of owning $8,000 on the original car loan, you will now owe $4,000. You owe that money even if you get a new car. So if you get a car that is $20,000, you will have a $20,000 loan plus a $4,000 loan. You might even be able to consolidate them into one $24,000 loan.

Answer 5

no entirely..
you owe 8K but you are "trading" or selling it for 4K, simple math here, so you are still 4k in the hole.

If you get the new 20K car you will owe 24K in total loans because you carry over the 4K you owe on the first loan... kapisch...
my advice, try to sell you car for more than 8K and get out of that loan.

Answer 6

As i understand it they will take the value of your car 4k. and subtract it from the amount owed 8k .Then add this amount witch is still 4k to the amount of the new car loan 20k making your new amount owed 24k.

Answer 7

because the trade in value of a car is always less than the resale value of it,,this is done so that the dealers or who ever takes in in trade,,can make money on it,,it isn't right ,,that they do this,,because you,,and i loose money on a vehicle,,your better off selling your car to an individual,,and getting what you can from it,,,than trading it in,,your just about giving them your car,,that's why,,they always want a trade in,,when sell it,,its all clear profit most of the time,,good luck,,i hope his help,s.

Answer 8

there is no reason to trade in a vehicle because they say that they will give you so much for a car but they raise the price by the value of your trade-in

Answer 9

so they can steal why else