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How does a trade in work when you still owe on your car you want to trade in?

Talk about personal loans and managing them to lower your debt

How does a trade in work when you still owe on your car you want to trade in?

Postby nico » Fri Mar 23, 2012 8:45 pm

i have a 06 murano I still owe 11,500 on... I want to trade this in for a 2010 altima that is listed as 16,900. how does this work? will i still have to get approved for another loan? or wil the dfference of 5,400 get tacked onto my 16,900 loan??
nico
 
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How does a trade in work when you still owe on your car you want to trade in?

Postby tarrant37 » Fri Mar 23, 2012 8:54 pm

you need to find out what your trade in is worth to the dealer and either pay the car down to that amount. Ot keep the car until its paid down some more. Otherwise the dealer gives you trade in value, then puts the balance due on the back of the new loan. Goes down and pays your car off cash and pockets all the interest. Then leaves you paying off two cars while you are driving only one. Keep your current car another year or pay a chunk of it off so you do not get totally screwed by the dealer.
tarrant37
 
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How does a trade in work when you still owe on your car you want to trade in?

Postby ismael » Fri Mar 23, 2012 8:56 pm

That all depends on what your Murano is worth. If you still owe 11,500 but the vehicle is worth 12,000, then you have $500 in equity. Basically, you come out $500 ahead, and that amount will be subtracted from your new loan.

In the likely event that your Murano is worth less than what you owe on it, then you are "upside-down" in your car loan. If you owe 11,500 but the Murano is only worth 10,000, then you have another $1500 that you'll either need to pay off at the time you make your new loan, or have it tacked onto the new loan.

Beware, though: most banks and reputable car dealers will NOT allow you to get a loan for an amount greater than the new vehicle is worth. Let's say your new vehicle is $17,000. If the bank gives you a loan for $18,500 (17k plus the 1,500 from your old loan) and you total the vehicle the next day, the insurance company is only going to write a check for $17,000, so the bank will lose out on $1,500.
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