If I have a car that is offered a trade in price lower than what I still owe on the car,how does that work? Does the new dealership pay that off and tack it on the new loan? Do I have to pay the difference first? Please help.

 

the difference between the dealership offer for trade and what you still owe on the loan will me added or subtracted from the new loan amount....

If you want a $20,000 car and the dealer offers 14k for a car you owe 15k on, you'll actually be borrowing 21,000 for the loan and to pay off the rest of your old loan... if the dealer offers you 15k for a car you owe 14k on, you'll only have to borrow 19,000 for the new loan...

 

that is where the term being "upside down" in a car comes from. when you have a car loan, generally you are upside down for a couple of years because you owe more than it is worth, depending on the down payment and the interest rate.

depending upon your credit, you will be able to finance a different vehicle before you are "right side up" in the car you are driving. lenders will finance the amount that you are upside down by adding it to the new loan.

it is not a particularly smart thing for you to do however. it is generally best to wait until one is no longer upside down as often times one never "catches up" and pays what a car is actually worth when buying it.

in our society, we often tire of our cars before it is in our best interest to tire of them and dealers capitalize on that.

 

Thank you both for your replies.

 

My 2 cents...

2 years ago i wanted a xB. I had a 2001 Hyundai Accent. At the time of making the deal the car was 3 years old with around 10K miles on it. KBB said it was worth 5K$ to the dealership. My dealership was offering 1,500$ and no more.

I listed my Accent for private sale on the internet. I sold it for the 5K$ i owed a week later. My credit was great so i ended up not owing or putting money down.

Sell it privately and break even.