Overhaulin'

How exactly does getting a new car work when you're not done paying off your current one?

I still owe $6,000 on my current car but I want to get a new one. How does this work? Can I trade my car in even though I don't technically own it? Will the car dealership that I go to take care of everything with my current finance company? How exactly does this stuff work?

Public Comments

1. For your current car, you will receive the value of the car - 6000 that you owe. That will pay off the loan. The dealer should take care of everything.
2. The dealership will add the difference between the trade-in value of your car and the amount you owe on it to the loan of your new car. For example, if you owe 6K and the car is appraised at 3K, they will add the other 3K to the loan on the new car. So, if the new car is $18,000 you will be financing $21,000 plus tax/tags/ and doc fee (if any). They will handle everything at the dealership, including paying off your trade. Good luck!
3. Yes, you can trade in your car.... the bank doesn't care where they get the money as long as they get it. The dealer will pay off the $6000 and either use the equity as downpayment on your new car or if you are upside down (meaning you owe more than the car is worth) the negative equity will be added to the cost of your new car. For example, if your car is worth $8000, the $2000 equity will be used as downpayment. If it's worth $4000, the $2000 negative equity will be added to the final cost of your new car. The dealer will take care of everything. All you have to do is sign some paperwork.
4. Yes, you can even though it does not make financial sense of doing it. Dealer will lump what you owe on the older car to the price of a new car minus the credit you get for trade-in if it has a value. Dealers love to take care of things you generally do not understand and can make a killing with higher interest rate and adding things you do not need. Make sure the rates are lower for the new deal than the one you are already getting. In short dealer will work out a deal to pay off the older car adding to the new car deal. You will then pay for the new car + $6K - trade in value = Net amount for you to pay. If you are paying 4% on your outstanding balance of $6K, and if you are going to pay 9% on the new deal, then it is not a good bargain for you. Checkout consumer reports website if you want to buy a car. They have lot of free stuff there to review and study.
5. You are essentially selling it to the dealer, so make sure you know what its worth before you go. They will pay it off, so the finance company will release the title to them. Make sure you understand exactly what you are getting for your trade and what you are paying for the new car. Sometimes it can be confusing when they just give you a trade diff. price. Be opinionated, don't let them control the deal. Its your car and you will sell for what you want, and you will pay what you think the new one is worth, so many car dealerships out there get the best deal possible.