If you're looking to trade in your car, can it have negative equity? Negative equity is when you owe more on your loan than the vehicle’s actual cash value. You can trade in your car at any dealership, but when you have negative equity, it comes down to what the lender allows. Some let you roll the balance over, while others want to see any negative equity eliminated.

3 Ways to Trade in Your Car with Negative Equity

It’s not unusual for a car owner to be upside down on their loan at some point. If you have negative equity and you need a new vehicle right now, you have three options to choose from to deal with it when trading in:

  1. I Owe on My Car Loan, Where Can I Trade it In?Roll it over – If the lender allows it, you can roll over the negative equity into a new loan. Keep in mind that this doesn’t eliminate negative equity, it just adds it to your new loan's balance. This increases your monthly payment and total cost, and puts you in a negative equity situation with the new loan.
  2. Pay the difference – If you have the cash, you can pay the difference. To find out what it is, you need a payoff amount from your current lender, and an appraisal from the dealer you’re selling it to. From there, subtract the appraised value from the loan balance; the difference is what you need to pay in cash to the lender.
  3. Wait it out – If you don’t need a new car right now, you should wait until you have equity or your current loan is paid off.

2 Ways to Get Rid of Negative Equity

In an ideal situation, you should have equity before you head to a dealership to get your vehicle appraised. However, this isn’t always possible, and you may need to find other ways to get out from being upside down.

If you’re not quite ready to trade in your car, or are wondering how to get out from being upside down, there are two additional options for you to consider:

  1. Pay more each month – If you’re able to pay more each month, you certainly can with most loan contracts with no penalty. This way, you pay off the loan and build equity more quickly.
  2. Sell the vehicle privately – A more tedious option is to sell the car privately. You may be able to sell your current vehicle for more than what a dealer offers you. If you sell it for a price that’s high enough, you could eliminate the negative equity or pay off the loan.

Need Help Finding a Dealership to Work With?

When you finance a car, negative equity is usually going to be a factor. When it comes time to trade it in, the best thing you can do is plan ahead, calculate how much negative equity you have, and consider the best route to take. If you’re looking to sell your vehicle, we can help you out. If you need an auto loan, we can assist with that as well.

When you’re ready to trade in your current car and get another loan, Auto Credit Express is here to assist you if you have less than perfect credit. For over 20 years we’ve helped consumers get connected to special finance dealerships in their area, and we want to help you! To get started, fill out our free and fast auto loan request form.