Do you want to trade in your vehicle near Raleigh, but you’re worried about the impact of negative equity? Even if you have negative equity on a car loan, there are favorable ways to move forward. The three primary options include:
Resolving negative equity doesn’t have to be a stressful experience! With Hendrick Buick GMC Cary on your side, you can move forward with confidence. In the guide below, our finance team explains how to calculate the amount of negative equity you have, as well as how to trade in a car with negative equity using one of these three options.
If you think you have negative equity, you should find out exactly how much you’re dealing with before deciding how you want to move forward. To calculate negative equity, you need to know two things: your current loan payoff amount and the current value of your vehicle.
If your loan payoff amount exceeds your car’s current value, then you have negative equity on your car loan. 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.
This is the most favorable way for Apex drivers to resolve negative equity. If you’re able to hold off on getting a new vehicle, you can take the extra time to catch up on payments and reduce your negative equity. One way to get started is to pay more than the minimum amount for your monthly payments. Another option is to make additional principal-only payments in addition to your regular monthly payments. Before you do this, you need to make sure your loan doesn’t include a prepayment penalty! Are you unable to hold off on getting a new vehicle? Explore the next two options as alternatives.
If you need a new vehicle as soon as possible and you have some spare funds available, you can always choose to trade in your car now and pay back the difference to your lender. Let’s say you owe $10,000 on your loan and you receive a trade-in offer for $7,000. The balance would be $3,000, which you would pay your lender out of pocket. You can then get into your next vehicle with a clean slate! What if you don’t have enough money right now to pay out of pocket? Read about rolling over the balance into a new loan, below.
Using the same example as above, if you don’t have room in your budget to pay the $3,000 difference to your lender out of pocket, you may also have the option to roll over the difference into a new loan. In doing so, you can get the new vehicle you need as soon as you need it, but you don’t have to front the difference immediately. However, rolling over a loan balance poses the risk of putting you upside down on your next loan right away. To help lower that risk, we recommend exploring used vehicles for sale. Used vehicles have a lower value than new vehicles, so you won’t have to borrow as much.
Stop by our dealership near Holly Springs to learn more about how to trade in a car with negative equity! Our team will be here to greet you and help you explore your options, guiding you to the smartest decision for your situation. We’re always happy to offer car-buying tips and other insights you can trust!
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