Trading vehicles?

Question

I bought a car in June 2005, the payment installment plans are for 72 months, I want to get a new vehicle, how would that work? Can i trade in this vehicle, if so would i still have to finish paying it off to the bank? I'm not really familiar with the steps, any suggestions?

Answer 1

Phone the lender and get a payout amount, If the payout amount is more than what dealer offers as a trade you can cash this amount or use it towards the new purchase.

If the amount is negative the dealer most likely can build the difference into your new payments.

As for the steps go to my web site http://www.usedcartips.org/ do some homework and learn the steps, be sure to navigate to " how much is my trade worth " web page will explain how a dealer appraises your trade...good luck

Answer 2

The bank needs to be paid. When purchasing a new vehicle and trading in the existing one, the dealership will handle that part of it. That's the nice thing about dealerships. They take care of all the paperwork including paying off the existing loan.

However, you likely owe more on the car then it's currently worth, because you had a long loan. This is called being upside down.

To make the deal work, you may need to pony up some cash, or roll the upside down amount into the new loan. This will put you even further upside down and result in higher payments most likely.

So give this a lot of thought. It may be better to stick with the car you have for a while. If you do trade it in, make damn sure you'll be happy with the new car until it's paid off.

Answer 3

Win you trade the vehicle in the difference between what the dealership gives you for the car and balance you owe (called equity) will apply to the new car loan. You will no doubt be in a "negative equity" situation meaning, simply, that you owe more money than your car is worth. The difference will be ADDED to the new loan, perpetuating the problem. Now you'll be borrowing X dollars MORE than what the cars value is, thus creating for you a VERY BAD situation from the start.

How can you combat this negative equity situation?

1) Don't trade your car in after 11 months. Loans are orcheastrated such that you pay mostly interest at first. So every time you make a car payment you're paying a large portion of interest and very little money is actually being applied to the principal of the loan.

2) Come up with cash down. At the very, very least you should have enough cash to pay tax, title, license, etc...That would be in the ballpark of 1500-2500 depending on the car. No point in paying interest on taxed money.

3) Look for cars that have HUGE rebate. Rebates are money from the factory that slice through negative equity because the apply as CASH DOWN against the new loan. This is free money from the factory; take advantage of it.

4) If you absolutely must get a new vehicle, make an educated decision and PLAN TO STAY IN THE NEXT VEHICLE UNTIL IT'S PAID OFF. Otherwise you'll never, ever get out of the "upside-down" syndrome and you'll pay a fortune over your lifetime in interest on money that you added to the next loan.

When you trade it in, the dealership will arrange to have the loan in its entirety paid off. But you're difference will be applied to the next loan. For instance:

You owe 15000 as a pay off on your loan

The dealership will give you 10000 for your car

The difference (5000) would be added to your new car loan. So if that car cost 15000 and you didn't put any money down, you'd finance 15000 + taxes & fees + 5000 negative.

That's a whole lot to put on a loan against a car with, maybe, 15K value. If you were to then try and trade the car in you'd owe like 20K on a car that's worth (because cars depreciate quickly) maybe 10K.

YIKES.

Good luck

and remember

caveat emptor

Answer 4

Pick out the vehicle you want to buy. Get a price on it. Find out how much the dealer will give you on a trade in. Compare that to what you owe on the car. If you owe less than the car is worth, you will have to pay this amount: new vehicle - old vehicle - payoff recovery. If you owe more than the trade in allowance, you will owe: new vehicle - old vehicle + payoff amount on the loan. The finance company will pay off the old loan and figure a new loan for you.

Answer 5

You can trade it in, and normally, whatever the difference is from what you owe, to the trade in price, you will have to pay. A lot of times, you will be able to add this amount to the new finance agreement. So basically, whatever you owe now will be added to the new car payments. At least that is what they did for me.