How to Trade in a Car with Negative Equity

What are your options when you have negative equity on a car loan? Typically, there are three options up for consideration if you want to trade in your car near Havana and resolve the negative equity:

1. Delay the trade-in
2. Trade in now and pay back the difference to your lender
3. Roll over the negative equity car loan balance

As always, Dale Earnhardt Jr. Chevrolet is here to offer guidance and insight to help you reach a confident decision! Join our finance specialists below to learn how to calculate negative equity and how to trade in a car with negative equity, using one of these three methods.

Learn to Calculate Negative Equity

Before we dive further into the ways to trade in a car with negative equity, you first need to determine exactly how much negative equity you have. To do this, you just need to find the difference between what you currently owe on your car and how much it’s currently worth.

1. Contact your lender or log into your account to get your loan payoff amount.
2. Use our trade-in calculator to estimate the current value of your vehicle.

If your loan payoff amount is greater than your car’s estimated value, you have negative equity. For example, if your loan payoff amount is $10,000 and your car is only valued at $7,000, you have $3,000 in negative equity on the car loan.

1. Delay the Trade-in

The most financially sound option for Quincy drivers trying to move on from a car loan with negative equity is to delay the trade-in until they’ve caught up on payments and no longer have negative equity. You can start by paying more than the minimum amount for your monthly payments or making additional principal-only payments on top of the monthly payments — just be sure your loan doesn’t include a prepayment penalty! If your situation doesn’t allow you to hold off on getting a new car, consider the next two options.

2. Trade in Now and Pay Back the Difference to Your Lender

Need a new ride as soon as possible? If you have enough extra funds available, you can trade in your car now and pay back the difference to your lender. For example, if you owe $10,000 on your loan and the trade-in offer is $7,000, you would pay back $3,000 to your lender out of pocket. If you don’t have room in your budget to pay back the difference out of pocket, you can also consider rolling over the balance into a new loan — read below to learn more.

3. Roll Over the Negative Equity Car Loan Balance

Let’s revisit the above example — if you owe $10,000 on your car and a dealership offers to buy it for $7,000, but you don’t have enough spare cash to pay your lender the remaining $3,000 out of pocket, you may be able to roll over the difference into a new loan. This can be convenient because it allows you to get the new vehicle you need right away, but you don’t have to stress about coming up with the extra money immediately. Bear in mind that rolling over the balance puts you at risk of being upside down on the next car loan right away — we strongly recommend exploring used vehicles, as their value is lower so you won’t have to borrow as much money for them.

Resolve Your Negative Equity with Our Help!

When you partner with Dale Earnhardt Jr. Chevrolet, you have a team of dedicated individuals on your side! We’re here to offer car-buying tips and other insights to help you achieve your financial and automotive goals in the smartest way possible. If you have additional questions about how to trade in a car with negative equity, stop by our dealership near Crawfordville or contact us to start a conversation.