Negative Equity 101: How to Trade In a Car When You Owe More Than It’s Worth

How to Trade in a Car You Owe Money On

Sometimes you’re ready for a newer, more reliable vehicle, but when you check your loan statement you find that you still owe more than your current vehicle is worth. Being “upside down”, or having negative equity, is something that occurs to millions of drivers every year because of rapid depreciation, longer loan terms, or smaller down payments. However, having negative equity doesn’t mean you’re trapped with your current vehicle, as our team at The Sisbarro Dealerships is fully capable of breaking down simple strategies and outline a practical plan on how you trade in your vehicle smoothly.

Learn How to Trade in a Car with Negative Equity in New Mexico

Simply put, negative equity means you owe more on your auto loan than the vehicle is currently worth. For example, if your car has a market value of $14,000 but your remaining loan balance is $18,000, you have $4,000 in negative equity. It’s a very common situation to find yourself in, usually caused by a few key factors:

• Longer Loan Terms: 72- or 84-month loans mean paying principal down much slower in the first few years.
• Low Down Payment: Rolling off the lot with $0 down means starting behind vehicle depreciation curves.
• Rolling Over Previous Loans: Carrying over debt from an earlier trade-in.

4 Smart Strategies to Trade in a Car with Negative Equity

There are a few simple paths a buyer can take when trading in an underwater vehicle, such as:

1. Roll the Balance into a New Loan (With Cautious Strategy): This is when a dealership adds the remaining negative equity into your new loan financing package. Look for pre-owned vehicles with substantial price discounts or high manufacturer rebates on new models to help “absorb” the negative balance without blowing up monthly payments.
2. Cover the Equity Gap with Cash Out-of-Pocket: Pay down a portion (or all) of the negative equity gap upfront using savings, a tax refund, or a cash trade allowance.
3. Utilize Sisbarro’s Top-Dollar Trade Appraisal: Getting an accurate, competitive market appraisal for your current car reduces the equity gap right from the start.
4. Delay the Trade & Make Accelerated Payments: If the gap is too large, make bi-weekly or additional principal-only payments for six to 12 months to bring the loan balance closer to market value before trading.

The Sisbarro Solution: Extra Effort Financing & Top-Dollar Trades

When you shop with a Sisbarro dealership, trading in an upside-down vehicle becomes much simpler. Not only do we pay top dollar for any pre-owned vehicle you sell us, aiding in shrinking the negative equity gap, our relationship with a vast network of national and local credit lenders allows the team at our finance centers to more easily restructure loans for buyers carrying negative equity. Our bilingual financial specialists can also provide guidance in both English and Spanish.

Negative Equity Auto Loan Solutions in Las Cruces & Deming, NM

Having negative equity doesn’t mean you’re stuck driving a vehicle that no longer fits your family or lifestyle. You can always use our online tool to value your trade with us and discover what your current car is worth in seconds. Don’t forget you can also get pre-approved for an auto loan at any of our Sisbarro locations, also from the comfort of your home. If you have any other questions about negative equity financing, contact us online at The Sisbarro Dealerships.

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