You can get a new car when you still owe on your old one, but you could run into issues if you have negative equity. In order to get rid of your old vehicle and finance a new one in this situation, you need to follow three steps to getting rid of negative equity.

Step 1: Payoff Amount

How to Get a New Car when You Still Owe on Your Old OneThe first thing you need to do is get a 10-day payoff quote from your current lender. The payoff amount lists an additional 10 days of interest charges, and any early payoff penalties if applicable.

You can’t base your equity situation on your previous statement, since it only shows the account balance on the date it was issued.

Step 2: Vehicle’s Actual Cash Value

Next, you need to determine your car’s actual cash value (ACV). You can visit vehicle valuation sites such as NADAguides to get an estimate, however, you must have the car appraised at a dealership to get the true number.

The dealer tells you exactly how much the vehicle is worth to them, and you aren’t left guessing. We recommend that you visit at least three dealerships to get appraisals so you can compare offers and choose the best deal.

Step 3: Your Options

Finally, you can calculate the difference and determine how much you owe. All you need to do is subtract your payoff amount from your car’s ACV to determine the negative equity amount.

After that, you can decide how to handle the negative equity. Here are four options for how you can deal with negative equity:

  1. Pay the difference – If you have the cash to cover the difference, you can pay it and trade in your old car to get a new one.
  2. Roll over the debt – If a lender allows it, you could roll over the negative balance into the new loan. We don’t recommend this, since you end up paying for (and interest on) the negative amount and the new loan together.
  3. Sell the vehicle – If you’re determined to get rid of the car, you may be able to sell it privately for a high enough price to pay off the old loan.
  4. Wait it out – If you’re not in a hurry to get rid of your vehicle or you have too much negative equity to sell it privately, you can wait until you have equity or you can cover the difference in cash with a private sale.

Looking for a Dealership to Work With?

Ideally, your car should have equity if you want to trade it in for a new one. It makes the process easier on you, and you don’t have to worry about paying the negative equity of a vehicle you no longer have.

If you need help selling your car, our trusted partner can help you. If you simply need a dealer to work with, we can assist with that as well.

At Auto Credit Express, we've helped countless people get connected to special finance dealerships in their area for over 20 years. These dealers are teamed up with lenders that specialize in helping people with bad credit, no credit, and even unique credit situations like bankruptcy.

To get started today, simply fill out our auto loan request form. The process is fast, easy, and free of charge and obligation.