How to Trade In a Car With Negative Equity

If you’re looking to get a new vehicle for your McKinney commute, but your current vehicle has negative equity, then you may be wondering what your next steps are. It is possible to trade in a vehicle with negative equity, but there will be a few more steps involved than a regular vehicle trade-in. Learn more about how to trade in a car with negative equity below, or contact our team if you have specific questions.

Negative Equity Car Loan

Negative equity is a term that refers to owing more on a vehicle than it’s worth. This is also called being “upside down” on a car loan. Negative equity happens when the value of your current vehicle depreciates. For example, if its trade-in worth is $20,000 now but you have to pay off $30,000 from when you bought it, you have a negative equity of $10,000. 

You might think that negative equity makes it impossible to trade in your current vehicle for a new one, but it can be done! In fact, sometimes trading in your vehicle makes financial sense if you’re looking to downsize to a cheaper car. If you’re interested, you can calculate the value of your trade-in right from our website.

However, before making any decisions, you should carefully review your financial situation and make sure that trading in your car is in your best interest. Many times, it makes more fiscal sense for a driver to wait until their loan is fully paid off, or until they have positive equity (they owe less than the trade-in value of the vehicle).

Trading in a Car with Negative Equity 

If you’re wondering how to trade in a car with negative equity, there are a couple different ways. The first, and most straightforward, is to trade in your vehicle and pay the remaining balance on your loan out of pocket. That is, if your trade-in is worth $10,000 and you owe $15,000, you would pay the dealership $5,000 to get out of the rest of the loan. This only works if you’re downsizing to a less expensive vehicle, which is usually why you would be trading in a car with negative equity in the first place.

However, if you aren’t able to pay back all of the difference on your car loan, there’s another option. You can negotiate a new loan with your dealership where they roll the negative equity you owe into the loan on the new vehicle. That way, the negative equity gets added to your new monthly payments. You should really only take this option if you’re in serious need of a less expensive car, and you know that your new monthly payments will be less than the current ones. 

Learn More with Prosper Chrysler Dodge Jeep Ram

If you have any questions about negative equity or want to learn more about the financing process, feel free to check out our finance center. You can also use our payment calculator to see what your new monthly payments will likely be after trading in your current vehicle.