Do you currently owe more than your vehicle is worth? This is known as negative equity. If you have negative equity on a car loan but you need a new vehicle, you might be worried about how to move forward. Fortunately, trading in a car with negative equity is possible — generally, there are three options for Raleigh drivers to consider:
The Hendrick Chevrolet Buick GMC Southpoint finance specialists are available to help you move forward from negative equity. If you’re nervous about getting started, check out our guide below! We’ll show you how to calculate negative equity and how to trade in a car with negative equity using one of the three methods listed above.
Getting started, you should know precisely how much negative equity you have. To calculate negative equity on a car loan, you need to know your current loan payoff amount and the current value of your car.
If you find that your loan payoff amount is greater than your car’s value, then you have negative equity. For example, if you owe $10,000 but your car is worth $7,000, then you have $3,000 of negative equity on the car loan.
Are you able to hold off on getting a new vehicle for your trips to Cary? If you have some extra time, then it’s recommended that you delay your trade-in and use the time to catch up with your loan balance and reduce your negative equity. One way to get started is to pay more than the minimum amount on your monthly payments going forward. Or, you could start making additional principal-only payments on top of your monthly payments. Keep in mind that you should check whether your loan has a prepayment penalty! If you don’t have the option to delay getting a new car, you can explore your other trade-in options below.
Do you need a new vehicle as soon as possible? If you’re able to come up with the extra cash, you could always trade in your vehicle now and pay the balance back to your lender. For example, if you owe $10,000 and you get a $7,000 trade-in offer, you would pay out of pocket to return the $3,000 negative equity back to your lender. Of course, paying out of pocket isn’t a viable option for every driver in Chapel Hill. Read more about rolling over a loan balance, below.
If you need a new vehicle sooner than later, and you don’t have enough wiggle room to pay your negative equity back out of pocket, then you might be able to roll over your loan balance. Using the previous example, the negative equity car loan balance of $3,000 would be added to the new loan for your next vehicle. The risk associated with rolling over a loan balance is that you could be upside down on the new loan. To help avoid that, we suggest choosing a used vehicle so you can borrow a smaller amount.
Do you have additional questions about how to trade in a car with negative equity? Stop by our dealership in Durham for more information. Our team is here to offer car-buying advice to help you move forward in the way that makes sense for you! If you have any other financial concerns, like how to get a car loan with bad credit, we’re happy to offer our expert insight.
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