Trading in car with loan

[Anonymous]

Can someone please help me? I'm clueless about how this works and don't want to be taken advantage of. I drive a 2016 Kia Soul I purchased used that still has $5000 left on the car loan. The car's approximate value is $9000. If I wanted to trade it in for another used car, how does that work? Does what I still owe just get rolled into the purchase price of the new car?

[Anonymous]

Why do you want to do this? A better financial decision is to pay the loan and keep the car until it dies.

[Anonymous]

Anonymous wrote:Can someone please help me? I'm clueless about how this works and don't want to be taken advantage of. I drive a 2016 Kia Soul I purchased used that still has $5000 left on the car loan. The car's approximate value is $9000. If I wanted to trade it in for another used car, how does that work? Does what I still owe just get rolled into the purchase price of the new car?

The loan gets paid off and any excess lowers the price of the new car. If you're wrong and will owe more than the trade in, do not roll the loan balance into your new loan. If you are ever in a situation where you have to do this, don't but the car. Negative equity will get you a terrible interest rate and you'll be underwater on the new loan for a very long time.

[Anonymous]

Anonymous wrote:Why do you want to do this? A better financial decision is to pay the loan and keep the car until it dies.

+1000. Unless you have some truly pressing need, don’t buy another car until this one is paid off and (ideally) you’re able to pay cash for the next car.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Why do you want to do this? A better financial decision is to pay the loan and keep the car until it dies.

+1000. Unless you have some truly pressing need, don’t buy another car until this one is paid off and (ideally) you’re able to pay cash for the next car.

People have all kinds of reasons for needing to sell their car and get another one. Just stop it.

[Anonymous]

On the surface, it's simple math as was said. Typically, the dealer buys your car, the loan gets paid off and the net (plus or minus) goes into the new car purchase. This is called an asymmetric negotiation where the dealer has vastly more information, training and leverage.

They will squeeze you one way or another: get a good price on your trade in and they get you on the financing, etc. Some folks are really good at negotiating with dealers. I'm one of the others who will never buy from a new or used car dealer ever again. Politicians will always get my vote if they say they will repeal the crooked franchise laws.

Here's one of many references with advice on how to not get ripped off too much.
https://www.consumerreports.org/consumerist/dealerships-rip-you-off-with-the-four-square-heres-how-to-beat-it/

[Anonymous]

Check Carvana for a quote. They offered me double what the dealer did and it was super easy. In our case they came to pickup the car and directly deposited my portion and then paid off the loan within a week. It was so easy.

[Anonymous]

Paying cash for a car is silly for most people.

And dealerships hate it.

[Anonymous]

Anonymous wrote:Paying cash for a car is silly for most people.

And dealerships hate it.

Why do I care what the dealership wants? The dealership wants you to only look at payments. Financing encourages people to spend more than they would otherwise afford. Most people drive around with a car payment for 60 months, which is silly, and then having to figure out how to trade in without getting hosed.

[Anonymous]

No, the dealership will call your lender and get a payoff amount. Then you li can use the $4000 equity for the new car.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Paying cash for a car is silly for most people.

And dealerships hate it.

Why do I care what the dealership wants? The dealership wants you to only look at payments. Financing encourages people to spend more than they would otherwise afford. Most people drive around with a car payment for 60 months, which is silly, and then having to figure out how to trade in without getting hosed.

So they give you a better price. They get a kickback from the loan companies. You humor them, take the loan they want to give you (it's often 1%) and then pay off the loan as fast as you want.

[Anonymous]

Just because it is valued at $9000 doesn't mean they will give you that. If you still owe $5000, get at least that. If you get more, then that dollar amount will be taken from the sticker price of the car you are looking to buy.