Occasionally, hard times hit, and we have no choice but to take on an auto loan before we are ready. In some cases, this happens while you're still paying off an existing car loan.

A Question of Equity

We received a question from a potential buyer who was wondering what he could do about the negative equity from a previous car loan.

"My vehicle was recently totaled. However, I still owe about $1,300 on the auto loan. I found a 2001 Ford Explorer at a dealership for $1,995. Would it be possible to roll what I owe on the previous loan into a new loan for the Explorer?"

This is a complex question, and we unfortunately cannot give a full answer since we don't know the buyer's complete financial situation (if they have money saved, their individual or household income, etc.). Now, here's what we can answer:Negative Equity, Car Loan

  • A 2001 Explorer is too old of a vehicle to be financed by a subprime lender. Typically, the vehicle must be 10 years old or newer, which in this case means it would have to be a 2005 model at the oldest.
  • Also, lenders typically have a minimum amount they will finance, which is usually $5,000. This means that the buyer would need to look at a newer model vehicle. It also needs to have enough gross profit to allow the lender to roll in the additional $1,300 balance from the previous car loan.
  • Other alternatives for the buyer would be to use a Buy Here Pay Here dealer and purchase a vehicle cheap enough to allow them to still have the funds to pay off the remaining balance on the previous loan (BHPH dealers typically do not finance negative equity).

Get Rolling

If you have run into a situation where you need to get a loan but still owe on a previous one, Auto Credit Express will do everything possible to find you the dealer that can help you get back on the road. Complete our free, fast and easy online application today, and one of our representatives will connect you with the right people. Start today!