If you have wondered, "Can I trade in my car if it has negative equity?" the answer is yes. MileOne Autogroup helps customers through this situation regularly. How you cover the gap caused by negative equity, rather than whether you can trade at all, is the decision that shapes the payment on your next loan.
How Your Payoff and Your Appraisal Line Up
Two numbers will guide your decision: the payoff figure your lender quotes and the amount your vehicle appraises for. Let's think this through with some hypothetical numbers. Let's say you have a vehicle worth $15,000 carrying $18,000 in remaining debt, which leaves $3,000 unaccounted for. Ask your lender for a 10-day payoff quote and get the appraisal in writing so both figures are firm before you sit down to negotiate.
Rolling the Gap into New Financing Has a Price
Folding that $3,000 into the new loan keeps cash in your pocket at signing, which is why it is the most common route out of negative equity. That being said, every move has consequences, and in this case a larger loan, plus interest charged on the shortfall along with the cost of the vehicle itself, means a higher overall cost for your next loan. Stretching the term to soften the monthly payment slows how quickly equity builds, potentially setting up the same problem for your next trade.
Ways to Shrink the Difference Before You Sign
If you already have your heart set on buying a new car, staying flexible helps. After all, choosing a vehicle at the higher end of your budget may be satisfying in the short term but more costly in the long run. Choosing carefully and having sufficient cash on hand before your next purchase costs nothing but patience. Guaranteed Asset Protection coverage, also known as GAP insurance, also helps because it covers the shortfall if a total loss happens while you are still underwater on the balance.
Value Your Trade at MileOne Autogroup
While knowing the car you want, its trim, and its specifications are all helpful, arriving when you know your payoff, your appraisal value, and the distance between them is also vital to being an informed consumer. The professionals at your nearest MileOne dealership are here to guide you through the process so there are no surprises later. We'll also help with new car financing, terms, leases, and protection plans, so bring your registration and current lender information along.