I want to trade in my truck, but I'm upside down. How does this work?

Question

My truck is worth $6965 according to Kelley Blue Book. I owe $12637 on my truck. I'm wanting to trade it in for a car, but I'm not sure how being upside down would affect me new payments.

Answer 1

let me guess... you bought an American vehicle... lol

Answer 2

I'll just echo what others have said. You probably can find a dealer who will sell you a new car, and roll the amount you are upside down on the truck, into the new car loan.

If you do this, you'll be even more upside down, because the new car will instantly depreciate when you buy it. Instead of being $6600 upside down, you'll be like $9k upside down. I'm guessing you'll need a long loan, like 6 or more years to pay this off. That will result in you being even more upside down mid-way into the loan. At some point, you'll probably end up being like $12k upside down. I'm sure you also have to pay a higher interest rate or purchase gap insurance.

Financially, it's not a good move. However, if your truck has become unreliable, or the gas just way to expensive, and you insist on doing this anyway, be very careful about the car you buy. Make damn sure you'll be happy in it for at least the next 7-8 years, because you won't really be in a position to get out of it until then.

Answer 3

It means you owe $5,000+ on the truck than what is is worth. This is a bad place to be, you probably bought the truck with no money down and got stuck with a high interest loan.

The loan is amortized so that you pay the interest off first, then the principal.

Some car dealers will take your truck on trade in and include the $5,000 of the old loan not covered by the value of the truck into the new loan. This puts you further into high interest debt.

The price of the new car is inflated by the debt on the truck.

In short you where -----ed the first time and they are willing to ---- again.

You might have to bite the bullet and hold on to the truck until it's paid off. Of course you might not want to wait that long.

At this point in the loan your payment on the principal is being excellerated, you might pay off enough of the principal in a year or two that you'll owe less then the Blue Book Value and no longer be "upside down". Then you can trade it in without losing money up front.

Beware one of the worse dangers of being upside down is the possiblity of a car accident. If your car is totaled the insurence company will only pay up to the Blue Book Value and you are still responsible for the remaining balance of the loan.

Never trust a car salesman, not because they are more evil than other salespeople but because most people don't know what they're doing when buying a car.

Answer 4

If your credit is good enough, the dealership would include the difference between the tradein and the outstanding loan and apply it to your new loan. This means that you are upside down on your new car the second you sign the deal.

Tack onto that the value loss on your car the second you drive it off of the lot, then you will really be upside down. This leads to a vicious cycle of increasing debt.

The best advice is to hold off getting a new vehicle if you can. If you are replacing the old one because it is not working then you have problems. That will probably make the trade-in even lower. If you are replacing because you just want a new car then you should hold back. Try to spend a few months making extra payments and reduce what you owe on your truck. If you take care of the car then the trade in amount will not decrease as fast as the amount owed. That means at some point you are no longer upside down. If possible, pay extra towards what you owe on the truck you have now.

Answer 5

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Answer 6

Ok, with you being upside down $6500 on your truck, a dealership will cover part of that with an incentive for buying a new vehicle. In other words they will give you a $2000 incentive (dealer or manufacture) and they will either add that to the new loan or expect you to come up with the rest for down payment. Your best bet? Come up with the rest so that your next loan doesn't put you so upside down that you will never get the car paid off.

Also, never get an auto loan for over 60 months! Any longer and you will upside down in any vehicle.

Always force them to give you the most for your trade! They will show you on paper how much they are giving you but on the back end where you don't see it, they are putting down MUCH less!

Ask for all rebates, incentives, etc...

Ask them to lower the price of the vehicle (being purchased). They can and will do it.

Get the terms that YOU want. YOU are in control and don't let them think otherwise. It is YOUR money and they want it!! Remember that always!!

With new or used vehicle (ones that qualify), you will want to get an extended warranty and GAP insurance. These will help if the car breaks down or if the vehicle is totaled, the GAP will pay for what the insurance doesn't. It can be a little expensive, but it is so worth it!!

Hope this helps!

Jim

Answer 7

You are upside down by $5600. If you buy a new car, you will automatically lose another 20% or more of the value of that car. You could be as much as $15000 upside down in your new car. Doesn't sound like a good plan to me.

Are you wanting to sell your truck because of gas mileage? If so, think about how much gas you can buy with $15000. Do you still want to trade your truck? If so, you should, IMO, have the cash on hand to make up the difference. That way you won't still be so upside down in the new car.

Answer 8

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RE :I want to trade in my truck, but I'm upside down. How does this work?
My truck is worth $6965 according to Kelley Blue Book. I owe $12637 on my truck. I'm wanting to trade it in for a car, but I'm not sure how being upside down would affect me new payments.
Follow 15 answers

Answer 9

You would take what you get for your truck and use that money to finish off the payments on that truck. Then whatever is left over which wont be much you would put down on a new car and then finance the rest and you would have a whole new payment plan for your new vehicle.

Answer 10

Simple answer: Dealers are so desperate to sell vehicles now that if you are even marginally credit worthy the will find a lender to finance not only the cost of your new vehicle, but also the amount of money you are upside-down on your current vehicle.

Harder answer: Some decision you have made in the past has lead you to be in the situation you are in now, that being you owe twice as much on a vehicle as it is worth. Making yet another decision like the one you are contemplating will make the situation even worse. Remember the "rule of holes" - when you are in one, stop digging!

Answer 11

when you have 6000 negative equity in a car it is added to the price of the caar you are buying if you have perfect credit its not much of a problem but if you hhave shaky credit you will have to buy a car that has more book value. i suggest leasing for 27 or 36 months because after the lease is over your negative will be gone remember your payment will go up about 150 dollars a month with that much negative. Dodge Chrysler Jeep has the best chance of putting you in something like a ram or durange to burry that much negative (i actually work for a GM dealer but use to work at a Dodge store) GOOD LUCK