Other Ideas For Making Extra Money On The Side To Pay Off Negative Equity
- Toyota Highlander
These are all midsize SUVs with third-row seating available. We owned a Buick Enclave and loved it! It was about 9 years old but had leather, heated seats, a backup camera, Sirius XM radio, and AWD, it met my familys needs at a price of just $10,000. If you can find a good, used vehicle with a lifetime warranty at a dealership , this is the route you want to go for your Dave car.
So to recap: talk to your bank about your options. Go to a Carmax. Get your valuation. Use your valuation as leverage, and just keep that nugget of knowledge for you as fuel with the other dealers so that you can get the best deal when youre trading out of a more expensive vehicle.
Let me know if you have any questions or comments! I hope this helps you understand a bit more about how to sell an upside-down car!
What If I Need A New Car But Have Negative Equity
There are a lot of reasons why a driver may no longer want their car, such as expensive gas costs, a lack of room, or a change in income. Whatever the reason, negative equity can make trading in your financed vehicle tricky. Here are a couple of options if you have negative equity on a car you no longer want:
- Deal with the Inconveniences of Your Current Car: So, your current car may require more gas than youd like or its cargo space isnt ideal. Can you live with it? If so, consider postponing your next vehicle purchase until negative equity is no longer an issue for you.
- Eliminate the Negative Equity: To determine how much negative equity you have on your car, find out its market value. Then, get a payoff statement from your lender that shows the value of your loan. Subtract the market value from how much you owe on your loan. The difference is what youll need to pay to remove the negative equity.
Dealing With Negative Equity
Here are some steps to take if you think you might have negative equity in a car youd like to trade in:
- Find out what your current vehicle is worth before you negotiate the purchase of a new car. Check the National Automobile Dealers Associations Guides, Edmunds, and Kelley Blue Book.
- If you have negative equity in a car, either because of your current car loan or a rollover from a previous loan, consider these options:
- wait to buy another car until you have positive equity in the one youre still paying for. For example, consider paying down your loan faster by making additional, principal-only payments.
- sell your car yourself. You might get more for it than what a dealer is says its worth.
- ask the dealer how theyll handle negative equity, if you decide to go ahead with a trade-in. Read the contract carefully. Make sure any oral promises are included. Dont sign the contract until you understand all the terms and the amount of your monthly payment. o negotiate your new loan for the shortest time frame you can afford, especially if the negative equity amount is rolled into the new loan. The longer your loan term, the longer it will take to reach positive equity in your new car.
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Alternatives To Trading In Your Car
If you are upside-down on your car loan, the best alternative is clear: Dont trade in your car. Keep making payments including additional ones if you can and wait to switch cars until youre in a better position financially. It may not be ideal, but it likely is the route that saves you the most money.
If you have positive equity, you may want to consider a private sale. These will typically result in more money for you. But expect an added headache of getting permission from your lender, waiting for the buyer to send money and paying off your loan yourself.
Two: Find Your Cars Actual Cash Value
To determine if you have negative equity, you need to find your cars actual cash value. You can do this by visiting vehicle valuation sites such as NADAguides, or by taking it to a dealership for an actual appraisal. Both are fine, but the most accurate number comes from an appraisal at a dealer. When you do this, you have the opportunity to negotiate a solid trade-in value, and arent stuck guessing about what it might be.
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S To Selling A Car With A Loan
Whether youre selling the car to a private party, trading it in or selling to a dealer outright, there are some things you need to know and a few steps you should follow when selling a car that has a loan.
1. Determine what your car is worth
First, determine how much your car is worth in the market today using a vehicle valuation site such as Kelley Blue Book or Edmunds. Other used-car buyers, including Carvana and CarMax, will also give you a valuation for your vehicle. The sites will ask for basic information about your car: the year, make, model, overall condition and the ZIP code in which you reside. Some sites will also ask for the license plate or vehicle identification number in order to generate a value. Be honest when you assess the condition. You may have come to overlook your cars flaws, like a rip in the seat or a small dent in the fender, but the buyer will see those problems and may value the car lower than you expect.
The way you plan to sell the car will influence how much money you make on the sale. For instance, youre likely to get more for your car if you sell it to a private party than if you trade it in to a dealer.
2. Determine your payoff amount
3. Understand your equity
Once you know the value of your car and the payoff amount, you can understand your equity in the car. Its the difference between the value of the car and the payoff amount. There are two options: positive or negative equity.
4. Discuss the sale with your lender
Whether Youll Come Out Ahead Depends On How Much You Still Owe On The Loan
If you are in the market for a new car but still owe money on your current one, then you might be wondering how to trade in a car that is not paid off. One key factor is whether the value of your car is higher than the outstanding balance on your loan. Heres what you need to know.
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Our Latest Upside Down Car Trade
My husband and I purchased a brand new vehicle years ago and decided awhile later, that, after financing $48,000 and $733 minimum monthly payment, we were done.
We were so tired of basically paying the equivalent of a house payment for a car. We already knew our credit scores, so we walked into our credit union.
We sat down with our banker, and we explained our situation. to pull the NADA value of my vehicle so that we could know exactly how far in the hole we were.
Being a former banker, I know that NADA is how the banks and credit unions determine how much money to loan on vehicles. They actually dont even use Kelley Blue Book.
KBB is garbage, in my opinion. Its not an accurate valuation of a vehicle. If banks and credit unions were using KBB, I might feel differently about it, but they just dont.
Car dealers tend to use KBB to their advantage when theyre offering trade values for your vehicle. So lets say you walk into your bank. You talk to your banker and learn that youre upside down $5,000.
If your local bank wont work with you, try Lending Tree. Their rates are low, depending on credit, but you can .
Whatever you dodont have the dealership run your credit. You lose all the power when they know your entire financial situation.
This is good to know going forward because if you are upside down, sometimes you can get a little bit of that negative equity squeezed in there. But I would always recommend gap insurance in that situationalways.
Does Carbraincom Buy Cars With Negative Equity
If you can avoid trading in your car before youre in a positive equity situation, do it. Even if it doesnt end up biting you in the backside, it can add stress to the situation and make your car payments higher than youre comfortable with.
The worst-case scenario? You could write off your new car and be stuck with thousands of dollars in negative equity, and no car to show for it!
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Get More Money For Your Trade
I actually was able to get $500 more than what Carmax had offered me, but, strangely enough, the Honda dealership that I purchased my vehicle from was offering me $2000 less than Carmax, and they said, Oh! We want your vehicle!
Because we bought it brand new at that dealership. It was 2 years old, and it had been serviced faithfully, so they could put it as a certified pre-owned vehicle on their lot for about $4000 or $5000 more than what they were offering me.
Needless to say, I walked away from that dealership. Well never do business with them again.
I hope that these tips have helped you a little bit to understand how to sell an upside-down car. Obviously, youll need some cash.
I would never recommend using credit cards to offset negative equitynot even the 0% credit cards because its just not a good idea.
You can tell yourself that youll pay off the balance within the promotional period, but its just too risky. Unsecured loans are really hard to get unless you have A+ credit, and the interest rate is usually very high on these types of loans due to risk.
Pay Off The Negative Equity
While you might not be able to cover the full cost of your negative equity, any amount you can pay in advance will help to offset how much you have to finance with your new loan. Many lenders will allow you to make additional payments toward your loans principal balance. The less you finance, the better.
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What Happens When You Need A New Car But Have Negative Equity
Due to depreciation, many people who finance their vehicle are going to be upside down at some point. It is extremely common with long-term loans where little to no down payment was made, or if a balance from a previous loan was rolled into the new loan.
The majority of people who keep their car and pay off the loan will not even realize they were ever upside down. However, this becomes a tricky situation if you need to get rid of the car.
There are plenty of circumstances that may call for this – if your family has gotten bigger, if your income situation has changed, or if you’ve had it with the car you are driving, etc. – but the resolution is always the same: You need to get out of the loan before you’ve paid it off.
There are a few different courses of action you can take:
- Tough it out: Postpone your vehicle purchase until you have eliminated the negative equity, or until you have paid off the loan.
- Cover the balance yourself: To find how much negative equity you have, get the payoff value of the loan from your lender, then research the value of your vehicle and subtract these two numbers. The difference would be what you would need to personally cover if you wanted to eliminate the negative equity.
- Trade it in and roll the balance into a new loan: This is the most common course of action if you already know that you need another car.
When You Consider That A New Car Can Lose 20% Or More Of Its Value Within The First Year Its Easy To See How You Could Wind Up Owing More Than Your Car Is Worth
If the amount you owe on your auto loan exceeds the value of your vehicle, you have whats known as negative equity. This is also referred to as being upside down on your car loan.
When trading in a car that has negative equity, you have several options but they can be costly, and some require a big chunk of money out of your pocket.
Lets take a look at how you can figure out how much your car is worth and whether you have negative equity along with your potential trade-in options.
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What Are My Options For Trading In A Car With Negative Equity
If you cant live with your current vehicle, another option to consider is a trade-in. If youre wondering how to trade-in a car with negative equity, its simpler than you might think. Car dealers can roll over what you owe on the trade-in car into a new auto loan. To do this, youll need a payoff statement from your lender, as well as price quotes showing the market value of the car. Before you take this route, consider the following:
- Your current auto loans balance wont disappear itll simply roll over into your new loan. Either way, youre responsible for repaying it.
- The principal of your current loan will be factored into your new loan. This means your monthly car payments and interest rate could be higher.
- You may have fewer vehicle choices and auto financing program options.
- Theres a chance youll become upside-down on the new loan.
Can You Trade In A Financed Car
Yes. Even though you are already paying the loan on your vehicle, you can swap it in for a new one. The person who takes your car off your hands will give you money in exchange, as much as any other trade-in.
In some situations, the lump sum would cover the outstanding amount on your debt, and you might even get a little extra that you can put toward your next purchase!
But first, you need to figure out how much equity you have in the car. Equity is the difference between the present valuation of your vehicle and the balance you owe on your debt. You have positive or negative equity based on those two variables that we will soon discuss.
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One: Get A Payoff Quote
To find out if you have negative equity in your vehicle, you need to request a payoff amount from your lender. Listed in the payoff amount is the interest accrued since the last loan statement and any early payoff penalties . Your previous statement only shows how much you owe on the date it was issued, so you cant get a true payoff amount by checking it.
Once you reach out to your lender, you have a certain number of days to pay the balance, usually 10. You can send the amount to your lender via e-check, a physical check in the mail, or in person. If you receive a payoff quote and realize you cant pay off the balance within the given time frame, thats okay. When the time comes, you simply request another payoff.
Trading In A Car With Positive Equity
Say you owe $5,000 on your car, and its worth $7,000 as a trade-in. You now have $2,000 of equity you can apply directly to the purchase of your next car.
This equity is deducted from the negotiated price of the new car. In addition to any equity applied to the new car purchase, you can make a down payment to reduce the overall balance of the loan.
But youll need to provide financing cash or an auto loan for the remaining purchase price of the car. The value of the trade-in will be listed in the contract for your new car. Make sure you are given the full agreed-upon amount you negotiated.
The best way to ensure that you get a good price for your trade-in and on your new car is to negotiate each one separately. Refer to the prices listed in the online guides during your negotiations.
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How To Calculate Equity
When youâre in the market to buy a new or used car and youâre planning on trading in your current vehicle, you should make some calculations to see whether you have positive or negative equity. Positive equity is when the value of the car exceeds the amount you still owe on your auto loan. This puts you in the best position to sell your car or trade in your old car to a dealership.
To see whether you have positive or negative equity, youâll need to know the value of your vehicle and the amount you owe on your auto loan. The difference between the two figures is the amount of equity you have in your vehicle.
Say, for example, that you have a car thatâs worth $5,000, and you owe $2,500 on it. In that example, youâd have positive equity in the amount of $2,500 . But if you have a car thatâs valued at $5,000 and you owe $6,500 on it, youâd have negative equity in the amount of $1,500 . Thatâs not a good spot to be in. It will be very difficult to trade in your car, as it currently is upside down.
How do you know the value of your car? You can find it by searching Kelley Blue Book, Edmunds, or similar sites. These websites give you the estimated values of your cars by taking into account the make, model, year, and condition of the vehicle. They also sort the listings into trade-in value, fair market value to a private party, and fair market value at a dealership.
