How Does Trading In A Car Affect Your New Car Purchase
Are you hoping to get rid of the older car you currently drive and replace it with a newer, more dependable vehicle? If you plan to do this, you could trade your car in to make the purchase. Trading in a car may affect your new auto loan, though. Here are several things to understand about getting a new car loan when trading in a vehicle.
You Must Pay off the Old Loan
The first thing to consider is the auto loan you have on the car you want to trade in for the newer car. If you do not have a loan on your current car, trading in your car may help your new car purchase. If you have a loan, you may end up with a deficit balance on the loan. You must pay off the old loan, though. The lender that accepts the old car for the trade-in will often pay the balance in full. The lender will call your current lender to find out the balance you owe and pay that in full.
The Equity in Your Current Car Affects Your New Loan
If you do not have a loan on your current car, you will have equity in it. The dealer that buys the old car from you will place a value on it. The new lender will reduce your new loan by this amount because this is how a trade-in works.
If you owe money on the car, the amount the dealer gives you might not cover the amount you owe. In this case, you have negative equity in the car. When you have negative equity, you must roll it over into your new loan, causing an increase in your new auto loan.
Your New Loan Also Includes Other Charges
Rolling a deficit from your old car into your new loan will increase the amount you must finance. You can reduce this amount by offering cash at the time of the purchase. Additionally, your new loan will contain other charges. The other charges include fees, taxes, and titling costs. If you want to keep the amount down, make sure you have positive equity in your trade-in and offer cash for a down payment.
Getting a new car by trading in your old one is a common event. To learn more about getting a new auto loan, contact an auto loan lending service today. The lender can help you qualify for a loan and answer your questions.