Dealing with a car that's worth less than what you owe on it can be a stressful situation. According to the article, 1 in 5 car owners are stuck with negative equity, which is a loan balance that exceeds the car's value.
Car dealerships that accept negative equity can be a lifeline for those in this predicament. They often have programs in place to help buyers get out of these situations, such as trade-in incentives or low-interest financing.
Some dealerships may be more willing to work with buyers than others, especially those who have a good credit score. For example, the article mentions that a dealership may offer a $1,000 trade-in incentive for a buyer with a 700+ credit score.
If you're facing negative equity, it's essential to shop around and compare offers from different dealerships. This can help you find the best deal and get out of your current situation.
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Understanding Negative Equity
Negative equity is a common issue that can arise when buying a new car, especially if you're trading in your old one. With rare exceptions, the older a car gets, the less it's worth.
Accidents, repairs, or other damage can further reduce its value, making it possible to owe more on your car loan than the car is worth. This is known as negative equity.
You might have negative equity if you still owe $18,000 on your car loan, but your old car is only worth $15,000. That's a difference of $3,000.
Some car dealers will promise to pay off your negative equity, but they might just roll the cost into your new car loan. This means you'll end up paying interest on that $3,000 plus the cost of your new car.
To avoid this, make sure to read the financing contract carefully before signing it. Look for details about the down payment and the amount financed on the installment contract. You might need to do some math to understand how the dealer is handling your negative equity.
Not everyone can pay off their negative equity, but that doesn't mean you can't trade in your old car for a new one. Just be aware of your options and proceed with caution.
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Managing Negative Equity
You can trade in your car even with negative equity, but be aware that it can lead to a bigger loan and more interest payments.
Some car dealers might promise to pay off the negative equity themselves, but this could mean they'll just roll the cost into your new car loan.
If you owe more on your car loan than the car is worth, you have negative equity, which can be up to $3,000 or more.
To trade in your car, you might have to pay the negative equity amount, which could be taken from your down payment or added to your new car loan.
Car dealerships that accept negative equity often have different methods for handling the remaining balance, so it's essential to ask questions and understand the terms.
You can't avoid paying the remaining balance on your old car loan, but you can explore options to minimize the impact on your new car loan.
The Federal Trade Commission (FTC) considers it illegal for car dealers to promise to pay off the negative equity without actually doing so, so be sure to report any suspicious activities.
You have the right to know how the negative equity will be handled when trading in your car, so don't be afraid to ask your dealer for clarification.
Keep in mind that negative equity can lead to a longer loan term, higher monthly payments, and more interest paid over the life of the loan.
Help for Upside Down Customers
You can get out of a car loan with negative equity, don't worry, it's not the end of the world. Many people have been in your shoes before and have successfully escaped their upside-down loans.
If you're upside down on your loan, you can still drive a high-quality vehicle, and there are options available to help you. You can call a dealership, such as Imperial Chevrolet, at 800-526-2886 or visit one of their locations.
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Negative equity, also known as being "upside down" on your loan, is more common than you think. It happens to responsible, hardworking people who have made their monthly payments on time.
You don't have to trade in your car at a dealership if you're upside down on your loan. Consider working with a company like Don't Trade It In, a nationwide car-buying firm that provides fair values for used cars and can help you pay off your existing loan.
The value of your trade-in is just a few clicks away. Use a trade-in value calculator, like the one offered by a dealership, to get an estimated value of your car. Factors that affect trade-in value include the mechanical condition and mileage of your car.
You can still drive a high-quality vehicle even if you have negative equity. A dealership like McGrath Auto can help you explore options and find a new vehicle that works for you.
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Frequently Asked Questions
Will CarMax take negative equity?
Yes, CarMax may include negative equity in your financing, but if not, you can pay the difference directly to CarMax. If the amount owed is less than $250, a personal check is accepted.
Will Carvana buy my car if I have negative equity?
Yes, Carvana will buy your car with negative equity, but you'll need to pay the difference between the car's value and the remaining loan balance. This amount can be found under your loan account's website as a 10-15 day payoff.
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