The car you have runs well. In fact, it's a great car with plenty of nice features and it is perfect for all of your needs. But your financial situation has changed, and you need to trade it in. But there is a problem: You still owe money on it.
The good news is that yes, you can trade in that vehicle. The bad news, however, is that there will be some drawbacks, especially if the reason you need to replace it is because you can no longer afford the payments. This is a factor you will need to thoroughly consider when determining what kind of car you can get to take its place.
What Happens When I Trade It In?
The process is pretty much the same as when you trade in a car that you own outright: the dealer assesses the market value, and that value is used towards the cost of the new vehicle. The main difference is that when trading in a car for another financing deal, since you still owe money on the first car, the dealer will find out what the payoff amount is and pay off the loan. If this amount is more than the car is worth, it is added on to the total for the new loan.
This is what is referred to as a "roll over." Because of this additional amount, you will have a higher payment on your next car. If you need to have a car with a lower payment, this could potentially limit what you can actually purchase. For example, if the roll over amount is $2,500 and you were approved for a $14,000 auto loan, you can only look at cars that are in the $11,500 range.
Of course, if you put down a significant down payment on the car when you bought it, you may be in a position where you do have equity in the car, meaning that it is possibly worth more than what you still owe on the loan. In this case, you won't have to worry about any additional amount being tacked on to the new loan.
Do I Have an Alternative?
If you really need to get rid of the car, you could try selling it, but you will need to pay off any remaining balance before transferring the title. Your other option would be to see if you can extend the term of the loan you currently have by renegotiating the loan to lower your current monthly payment.
So, if the time has come where it is essential to move on from your current car, truck or SUV, Auto Credit Express can help. All you need to do is fill out our quick and easy online auto financing application to get started. From there, we will connect you with the right dealer that can help you. Don't wait any longer, apply today!