Car Buying Advice

Upside Down

Upside Down

Managing Negative Equity

So, you want to buy a new car. Congratulations! Buying a new car is always exciting, but you’re upside down on your current car. This is a tough situation. First, you have to ask yourself again… “Do I need a new car?” If the answer is no, pay off or pay down your current car before you buy a new one. If the answer is yes, then you have to do what you have to do.Being upside down is never a great position to be in; however you can make the most out of a difficult situation. In conditions like this, knowledge is power. Before you go any further, lets define what upside down means.

Upside down: The value of your car is less than the outstanding balance on the loan on the car, simply put — you owe more than the car is worth.

Five ways to tackle being Upside Down:

1. Postponing your new car purchase until you’re in a positive equity position. For example, consider paying down your loan faster by making additional, principal-only payments.
2. Sell your car yourself to try getting more for it than its wholesale value.
3. If you decide to go ahead with a trade-in, ask how the negative equity is being treated in the trade-in. Read the contract carefully, making sure that any promises made orally are included. Don’t sign the contract until you understand all the terms, and the amount you will be paying every month.
4. Keep the length of your new loan term as short as you can manage. If the negative equity amount is rolled into the new loan, the longer your loan, the longer you will take to reach positive equity in the vehicle.
5. Check the market value of your car if you decide to trade it in to ensure your getting the most for your trade.




Needing to buy a new car when you’re upside down on your current car is never easy. Now, you are better prepared to move forward with your new car purchase and make a better deal.

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