“Even if you have negative equity, you can still trade in your car most of the time. If possible, the best plan of action is to roll the negative equity into the new car loan. If that’s not possible, you should seriously reconsider the timing of your trade-in.
Without the ability to roll the balance left over from your old loan into a new loan, you’ll usually have to pay off the remaining balance in a lump sum. If you don’t have the cash for this, you may want to wait to purchase a new car and keep making payments until you have positive equity, or at least reach a breakeven point.
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