![]() If the car is worth $15,000 and you still owe $20,000, that is $5,000 of negative equity. Compare the value to the amount that you owe. Research the estimated value for your current car online. Discover how much negative equity you haveĬontact your lender or login to your account to find out just how much you currently owe on the contract. When rolling over a car loan with negative equity, you'll want to take the following steps. How to roll over a car with negative equity It can also be worthwhile if the new loan has a lower interest rate, or you are buying a less expensive car. This option should only be considered if you don't have the money to pay off the negative equity and are struggling with your current car payments. You are creating a larger loan amount with more interest. ![]() It can immediately put you into negative equity on your new car loan. This is very convenient, but it is not advised. Dealers can sometimes recommend rolling the negative equity into your next car loan. This is referred to as rolling over the loan. You can transfer negative equity into a new car. Can you transfer negative equity into a new car? Before you do this, check and make sure that there is no prepayment penalty. For example, if you currently owe $15,000 on your car and the dealer offers $12,000 for a trade-in, you can make up the $3,000 difference to your lender. If you need a newer car sooner, you may consider paying off the negative equity all at once out of your own pocket. Your negative equity must be paid off sooner or later. Delaying a trade-in is often the best option financially, but it only works if you can hold off your trade-in until you've saved enough to pay off the loan. However, you need to be careful, as you could go into greater debt and more negative equity. If you can hold off on buying a new vehicle, you can reduce your negative equity by making extra payments on the car loan. Trading in a car with negative equity can be beneficial if you can find a vehicle that is less expensive and fits into your budget. You don't want to put yourself in a position where your vehicle is costing you a lot of money in extensive repairs. Is it smart to trade in a car with negative equity?įinancially, it can make sense to trade in a car with negative equity if the car is in poor condition and unreliable. The more time it takes to pay off your car, the more likely you are at risk for negative equity. Long-term car loans that are six or seven years often lead to negative equity. The car's condition can deteriorate and reduce the value. It also occurs if you put a lot of wear and tear on your car. Negative equity often happens if you don't put enough money down. With the rapid depreciation, it is easy to owe more than your car is worth if you used financing. A new car can possibly lose 20% of its value in the first year. Cars decrease in value the minute you drive them off the car lot. Many people refer to it as being upside down on your car loan. When the amount you owe on your auto loan is greater than the vehicle's value, you have a negative equity car loan. Trading in a car with negative equity can be difficult, but with a little bit of research, you can find a deal that works well for you. You also can negotiate a trade-in deal that rolls over the negative equity. You may be able to arrange a negative equity trade-in. You may be wondering how to get rid of a car with negative equity. This can be very frustrating if you need a new car and are looking to trade in your vehicle. If you have just found out you owe more than your car is worth, you have negative equity on your car.
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