How to Trade a Car with Negative Equity? | Bumble Auto (2024)

FAQs

How to Trade a Car with Negative Equity? | Bumble Auto? ›

There are two ways of trading in a car with negative equity

If you're able to come up with the extra cash, you could always trade in your vehicle now and pay the balance back to your lender. For example, if you owe $10,000 and you get a $7,000 trade-in offer, you would pay out of pocket to return the $3,000 negative equity back to your lender.

Refinancing the loan or selling the vehicle are two of the most commonly used ways to deal with negative equity. You may also consider trading in your vehicle for a different car, though that can lead to additional auto loan debt if you're rolling the original loan balance over.

If you owe more than your trade-in value – often referred to as “negative equity” – a dealer or lender may offer to roll the balance of your existing auto loan into a new auto loan, but this will make your new auto loan more expensive.

One thing to keep in mind is that there is no maximum amount you can finance when it comes to negative equity.

Does GAP insurance cover negative equity? Yes. Negative equity (aka an upside-down loan) is another term for the gap between what you owe on your auto loan and the car's actual value. GAP insurance covers the difference between the two.

If you finance with us, part of your trade-in's negative equity can be rolled into your purchase loan. Any additional negative equity will have to be paid upfront as part of your down payment.

Some car dealers say you won't be responsible for the remaining balance on your old car loan when you trade in your old car. But that might not be true. Instead, some dealers just roll over the negative equity into your new car loan, so you still end up paying it. Say you want to trade in your car for a newer model.

In most instances, yes, you can trade in a car with a loan, and some dealers might roll your remaining balance into a new loan. But trading in your car doesn't make your loan disappear. You will still have to pay off the remaining loan balance that your trade-in amount doesn't cover.

Losing your car can hurt your credit quite a bit unfortunately. Having your car repossessed or surrendering it voluntarily is seen as a major negative event by lenders. They'll view you as high-risk. Expect your credit score to take a big hit, maybe over 100 points or more.

When not to trade in your car? ›

Cost – If trading in a car will cost you money, you should put it off as long as possible. When will it cost you money? When you owe more than the car is worth. Whether you cover the difference out of your own pocket or roll it into the next car loan, it will cost you.

If your pay-off amount is more than our offer for your car, the difference is called “negative equity.” In some cases, the negative equity can be included in your financing when you buy a car from CarMax. If not, we'll calculate the difference between your pay-off and our offer to you and you can pay CarMax directly.

Since most cars depreciate quickly after purchase, you may find yourself stuck with an upside-down car loan. Your options for getting right side up include paying off the negative equity, trading your vehicle in or refinancing your upside-down car loan.

Can you transfer negative equity into a new car? You can transfer negative equity into a new car. This is referred to as rolling over the loan. Dealers can sometimes recommend rolling the negative equity into your next car loan.

How can I get out of an upside-down car loan with negative equity? You may be able to get out of an upside-down car loan by paying it off in a lump sum or with extra payments, refinancing your car loan, selling your vehicle or surrendering it to your lender.

Even if you have positive equity, you'll likely be car-less for a bit between the time of your sale and purchase of your new vehicle. If you have negative equity, you'll need to pay your loan off in full before—or at the time of—sale to the new owner.

A common way to get out of negative equity is to trade in your current vehicle for a leased vehicle. This not only gets you out of the red on your investment, but it also helps rebuild credit as you make manageable monthly payments.

In some cases, the negative equity can be included in your financing if you buy a CarMax car. If not, we'll calculate the difference between your payoff and our offer to you and you can pay CarMax directly. If the amount you owe is less than $250, we will accept a personal check.

If your equity is positive, you may be in a good position to trade in your vehicle even though it is not yet paid off. Negative equity, however, may be more costly than you might expect or are willing to pay.