How to Trade in a Car With Negative Equity & Are Upside-Down

Being upside down on your trade in is very, very common. The term upside down means the same exact thing as negative equity. This means that you owe more on your trade in than it is worth (or so the dealer says). So, how do you trade in a car with negative equity?

With people financing vehicles for longer terms to get lower payments, some as long as 7 years, it's very common to have negative equity. This is also true due to dealers putting people in cars that are not worth near what they are being sold for. Dealers call that "knocking someone's head off". The way that this is done by defrauding the lender by describing the vehicle on the loan application as having an upper end trim line, bigger engine or more features than the vehicle really has. This adds "loan value" to the car and allows the dealer to sell it to you at a higher price. You end up oweing much more for the vehicle and in some cases, thousands of dollars more than it should have ever been sold for in the first place.

If you have negative equity in your vehicle, then there is one surefire thing that you absolutely do not want to do and that is... trade it in. You don't want to trade your vehicle in and I'll tell you exactly why.

When you trade in a vehicle that is upside down, the negative equity from your current car loan is added to your new loan. As you will already naturally have a little negative equity on the newer car that you are buying, that much more will be added to your loan. I've seen people that are $4000 and $5000 in the hole with their car loan, get that same amount ADDED to the amount that they owe on the newer vehicle that they buy.

Then, they're REALLY tanked, no doubt.

There are two options if you want to get out of a negative equity situation with your vehicle. The first option is very simple. Keep it. Drive it until the wheels fall off and save yourself from getting into an even worse situation than you already are in by trading it in at a dealership. The dealership is NOT going to give you what you can sell it for, which leads me to the next option.

Arrange financing for your new vehicle outside of the dealership, sell your car on your own and buy your new car while your waiting for your trade in to sell. You may be surprised that in some cases, you can easily get someone to just take over the payments on your current car loan - even if there is negative equity. There are many people out there that are just grateful to get a car loan and don't know about online lending services where they can get a real car loan with bad credit.

Having negative equity is rough. One sure way to get rid of it is to keep driving and making payments.

P.S. If you can find a really BIG rebate on a new car, then there may be enough rebate money to cover your negative equity. Keep in mind, that when you do that, you are still adding your negative equity onto your new car loan. Also keep in mind, that when there are big rebates on new vehicles, the price of the one and two year old models drop because they have to be lower than the price of the new car after rebate or everyone will simply by the new car.