Negative equity means that you owe more on your auto loan than your car is currently worth. This typically happens to everyone at some point, especially at the beginning of a new auto loan. It usually doesn’t pose a problem, unless you’re looking to trade in your vehicle before you have equity. Let's look at how negative equity affects the trade in process in Seattle, and how you can deal with it.

Trade-Ins with Negative Equity in Seattle

How Does Negative Equity Affect a Car Loan in Seattle?If you’re thinking about trading in your car in the Emerald City, negative equity doesn’t have to stand in your way. You can still trade in a vehicle with negative equity, as long as the lien is removed.

In order to remove a lien from your car, you have to pay off the loan. There are typically two options for doing this:

  1. Pay the balance out of pocket – Since the amount you’re getting for your vehicle doesn’t cover what you owe, you can take what you get, and add enough of your own cash to it to pay off the remaining loan balance.
  2. Roll over the negative equity – This option isn’t always available, and you should proceed with caution, especially if you have poor credit. In this case, the dealer pays off your existing loan, but the amount of negative equity is rolled into your new loan. This makes the principal higher, which increases the total cost of the new loan because you're paying interest on that negative equity amount.

If neither of these options feel right for you, then you may have to wait until there’s equity in your car to trade it in. If you and/or your vehicle can hold out until you’ve paid enough to get the loan balance below your trade-in value, it might be wise to go this route.

However, if you find yourself constantly throwing money into your car for problems, and you’re nowhere near having equity, it might be time to consider options one or two from above.

Reducing Negative Equity

It doesn’t have to be hard to gain equity in your vehicle. Make sure you take good care of it and keep it clean and free of damage both inside and out to retain as much value as you can.

In order to quickly remove any negative equity that you have, here are two options to consider:

  1. Sell the car privately – In a private sale you can set the selling price yourself, and this means you can try and get what you owe out of the vehicle.
  2. Pay off your loan quicker – There are several ways to quickly reduce your loan balance below the value of your car by making extra loan payments. You can make a half payment every two weeks, or you can pay extra when you have it. Either way, the more you pay on your loan while keeping up the condition of your vehicle, the better.

Getting the Right Dealer for Your Trade-In Situation

Now that you know negative equity doesn’t have to affect your auto loan, you can take the time to make the right decision when it’s time to trade in your car. If you’re dealing with negative equity and you have bad credit, it’s important to go to the right Seattle dealership to trade in your vehicle.

Here at Auto Credit Express, we work with a large network of special finance dealers in and around the Emerald City, Washington State, and the rest of the country. The best part is you don’t have to drive up and down the Sound looking for one, we do the searching for you and connect you with a dealership in your area.

The process is fast, free, and simple. Just fill out our auto loan request form, and we’ll get to work for you!