Auto Financing Questions

abcdefghi

abcdefghi

AC Members
Jun 6, 2007
1,331
5
38
There is possibly a simple answer to this, but I have never had to finance a car before, and so do not know the answer. At the moment I have car A that I owe finance on, I have only had this car about a year, but its been a constant headache and constantly requires repairs (which sucks, because I really like the car). I still owe the majority of the finance on this car, however because of its constant need for repairs I am debating trading it in.

What happens to the finance I owe? Does this get cleared when I trade the car in and effectively give me a low trade in value? (since the majority of the trade in value goes to paying off the finance) or do I have to keep paying the original financed amount, plus whatever the difference is in the trade in value off the new (used) car. Not sure if that makes sense, but say if the new car is $15k, I trade mine in for $14K, do I then owe $1k to the new car dealer and the rest of the finance on car A?

Thanks.
 
The current balance is paid, essentially rolled into the new financed amount. Your current cars equity and payoff both go into the new deal.

The place a lot of people get into trouble is when they are "upside down" in their vehicle. In other words, they owe more than the car is worth - negative equity makes it very hard to trade. Putting very little down on a car, financing for a long term (60 or even 72 months), or selling the vehicle soon after you buy it (a year or two) are all contributing factors to being upside down.

If you go to a dealer - their figures can be very hard to understand. What they are giving you for your car is often misleading. And, so many consumers are caught in "what I can pay a month" without looking at the actual price of the vehicle, or how much they will end up paying over time, which is directly related to the financing terms.

Right now, with the economy, car dealers are certainly eager to sell cars. Low interest rates are out there - get one if you can. Although it obviously has to be paid back, a 1.9 or 2.9% interest rate on a auto loan is basically free money - hard to pass up.
 
The short of the story is the they will appraise your old car. Any difference in the balance and value will be tied in to the loan on the new car. More often than not putting you upside down on your new car. Depending on the balance and value of your current car of course.
 
for example..

your car is worth $10,000
you owe $9000

the dealer offers you $9500 for your trade.
you take the %9500, and pay the car off, (or the dealer will), and you have the remaining $500 to pay down on the new vehicle or buy french fries and beer...
 
I think realistically I am pretty much stuck unless I decide to trade in for an older/cheaper car than what I currently have. Really I am just fed up with the money I am spending on repairs lately and wish there was some way I could get rid of it and get something else without ending up in a worse situation finance wise.
 
I'd advise against financing the replacement...especially while you are upside down. You could end up with a $3-400 or more payment...ouch! Or a 72 month term...also ouch.

Is it the same thing breaking...or different things? Perhaps the previous owner didn't maintain it right and things are wearing out? If it's a $14000 car it's probably worth putting $2-3K into to fix it right.

If it's a money pit-What about fixing what's currently wrong, selling it and getting a $3-4000 car? There are alot of reliable cars in that price range. Or buy a beater as a second car.

Remember...All cars break, even NEW cars...and you pay DEARLY for that new car warranty. Better to set aside $100/month for repairs than to be paying a $400 car payment. And remember when that new car warranty expires in 3-5 years; you'll still be paying that $400 with NO warranty.

Ok...soapbox mode off :)
 
...or just outright sell your old car for the amount you owe or a bit more (if it's still worth it). Take the money and pay off your loan.
 
You must log in or register to reply here.
AquariaCentral.com
Top Bottom