If you finance a car and trade it in for a new car in 2-3 years what happens to the money owed on the 1st car?

Question

Went to a dealership recently and the man who sold me my current car asked if I was interested in doing just that. It doesn't seem wise to me, though. Thoughts??

Answer 1

when you go to the car dealership they will appraise your current vehicle. If they offer you MORE money for it than what you currently own on your loan that is known as "equity". You can use that money as a down payment for the new car.

If they offer you less money for your car than what you owe on your loan, you are responsible to put that up front just to pay off your loan, and then on TOP OF THAT you have to give a down payment for the new vehicle.

Be careful and think with your head not your heart.

Good luck, and happy hunting!

Answer 2

There are two factors to consider. One is the current value of your vehicle, and the second is the balance owed on the loan. If the value of the vehicle is greater than the amount owed, you have equity in your car, and that money can be used as a down payment. If there is more owed on the vehicle than the current value, the difference has to be made up somewhere!.

You can pay the difference in cash, or the balance may be rolled into the new deal. This is usually done by increasing the price of the new car, and increasing the trade in allowance. The best thing to do is to keep the car until you are in at least a positive equity situation (owing less than the value). Unless you have a reason to trade (starting to have problems with your current vehicle, changes in family size) keep your car.

Answer 3

it's not worth trading in your car if you still have a balance on it. its basically like giving your current car back to them for free and the new car will be about the same amount as priced. i am sure they will try to cut you a deal like knock off several thousands or try to throw in something that might sound too hard to resist.if you tire of your car in 2-3 years maybe you should get a lease to buy contract. that way you can switch cars anytime you want. however, you do have to put in atleast 2-4 thousands at signing.(tax,registration etc)

Answer 4

its rolled over to a new loan.. yes its a big money loser for you. dealers are happy if ypu trade every 2 to 3 years..They give you little for trade in ...

Answer 5

they add it on to your new car, don't let them tell you they don't. I did the same thing, and what should have been $400. a month turned into $700. a month. Yep I'm mad.