How To Trade In Your Vehicle With Upside-Down Car Loan

How to Trade In a Car with Negative Equity

Cars lose more than 20% of their values within the first year of purchase. Knowing this makes it easier to understand why most people end up owing more money than what their vehicles are worth.

When the amount you owe on the auto loan is more than the value of your car, it’s known as negative equity or being upside down on loan. The longer it takes to pay off the vehicle, the more vehicle depreciates and the more negative equity increase, 

Trading a vehicle with negative equity is a lengthy and time-consuming process that can end up costing you some cash. But here are a few of the best trade-in options in Australia.

 

How To Sell A Car That Is Not Paid Off – Trading In An Upside Down Car

Option 1: Delay the trade-in

Most dealerships won’t offer you anything more than the wholesale price if your car has negative equity. In this case, it would be best to delay the trade-in and pay the negative equity. By making additional payments or paying more than the monthly amount, you can improve the negative equity of the car and get better rates for it. 

But make sure there is no clause in your loan contract that prevents you from paying off your loan early, especially look for prepayment penalty in the contract. 

Option 2: Roll the negative equity to your new car loan

If you don’t have enough money to pay off your negative equity quickly, some dealers will offer you a way to roll your negative equity into a new car loan. For example, you owe $20,000 on the car loan, and the dealer is asking for $17,000 for a trade-in. In this case, they will roll the $3,000 difference into the new car loan. This method is quite convenient because here you don’t have to pay anything from your pocket.

But it has a downside; now, the new loan is increased by $3,000, which you would have to pay eventually. And the larger the amount borrowed, the more you are likely to be upside down on your car loan. In this case, the “new vehicle” you are purchasing should be at least two years older. This way, the overall amount of the loan will be less, and you would be able to pay it off quickly. 

What Happens When You’re Trading In A Car With Negative Equity

When you trade a car with negative equity, one of the worst disadvantages is receiving less cash for car in Brisbane. Even if your vehicle is in good condition, you would have to accept a low ball offer for your car.

How To Not Be Upside Down On A Car And Avoid Dangers Of Negative Equity

Here are some valuable tips you can use to avoid negative equity on your car loans:

  • If you can afford it, use the deposit

Depreciation dramatically affects the value of the vehicle. So if you borrow more, the likelihood of you experiencing negative equity increases exponentially. And it affects those people more who change their vehicles regularly. So whenever you get a chance, try paying at least a 20% deposit for the vehicle. 

  • Pay it off as soon as you can

If your budget allows, make significant repayments for the vehicle in a short span of time. This will ensure that you don’t face negative equity on the loans.

  • Don’t overspend when getting the car

It would be best if you were careful from the start. If you spend more money than you can afford, you are at a higher risk of being upside down on a car. So, it’s better to stay within your means and pay off the repayments without struggling much. 

  • Choose second-hand vehicles instead of brand new ones

It’s understandable to prefer buying new vehicles instead of old ones. But purchasing a second-hand car has its benefits. For example, if you choose to buy a two-year-old vehicle, you can benefit from car warranties that last between five to seven years and get a bargain price because of depreciation.

Does A1 Auto Recycling Buy Cars With Negative Equity?

Dealerships are not the only option to sell your car with negative equity. Businesses such as A1AutoRecycling purchase your old car and offer instant cash for cars in Brisbane up to $8,999 no matter the vehicles’ make, model, or condition.

Once A1AutoRecycling purchases your vehicle, they will pay the lender the due amount and pay you the difference. So if you want to avoid the hassle of the dealership, choose A1AutoRecycling, and they also provide FREE Car Removal Brisbane area.