How do you trade in your car with negative equity?

Is it possible to trade in a car with negative equity? I need to get a cheaper car with lower monthly payments, but I owe much more on my car than it’s worth.

Answer
It can be hard to manage an upside-down loan, but you can trade in a car with negative equity—so long as you pay the difference on your new loan. When you trade in a car with an upside-down loan, the dealership will roll over the equity from your previous loan to your new one.
Here’s an example to make this a little easier to understand. Let’s say you owe $5,000 more on your car than it’s worth. If you trade it in and take out a new loan for $20,000, then you’ll owe your lender a total of $25,000 (the value of both the new loan and your unpaid debt).
If you’re worried about making your payments, you can also try refinancing your car to get a lower rate. Or, you could offset the cost of your loan by saving on other car expenses.
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Liz Jenson
Answered on Oct 27, 2021
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