Trade In Your Vehicle, Even With Negative Equity
If you find yourself in a situation where you owe more on your vehicle than it’s currently worth, you’re not alone. Many drivers struggle with negative equity, but the good news is that trading in a car with negative equity at a dealership is possible, and with the right guidance, it can be a manageable process. At Key Scales Ford, we’re here to help you navigate your negative equity trade-in and get you back on the road with a Ford vehicle that better suits your needs.
In this blog, we’ll explore the steps to trade in a car with negative equity, how it affects your next purchase, and the best ways to minimize the impact on your finances. Let’s dive into everything you need to know about negative equity trade-ins.
What Is Negative Equity?
Negative equity occurs when the amount you owe on your car loan is higher than the vehicle’s current market value. This often happens if you’ve financed most or all of the vehicle’s cost or if your car has depreciated faster than expected. For example, if you owe $18,000 on a car but its market value is only $15,000, you have $3,000 in negative equity.
New cars, especially, depreciate quickly, often losing up to 20% of their value within the first year. As a result, some drivers find themselves “upside down” on their loans. But don’t worry — trading a car with negative equity is possible with the right approach.
Can I Trade In A Car With Negative Equity?
Yes, you can trade in a car with negative equity, but it requires careful planning. At Key Scales Ford, we’re here to help you assess your current vehicle’s value and create a plan to manage the negative equity. Our team of experts will walk you through all your options so you can make an informed decision. We can help you understand how much negative equity you have and explore your best options.
The Best Way to Trade In A Car With Negative Equity
There are several ways to manage negative equity when trading in a car. The best method for you will depend on your financial situation, the value of your current car, and the Ford vehicle you’re interested in. Here are some strategies:
1. Roll the Negative Equity Into a New Loan
One common option is to roll the negative equity into your next vehicle’s new car loan. This means the remaining balance of your current loan will be added to the cost of your new vehicle. For example, if your car’s loan balance is $3,000 more than its worth, you could roll that $3,000 into the loan for your next car. This option works best if you’re upgrading to a vehicle with strong long-term value and if you have the financial stability to handle a higher monthly payment.
However, it’s important to be cautious when using this method. If you’re not careful, rolling over too much negative equity can lead to even higher payments and future financial challenges.
2. Pay the Difference in Cash
If you have some savings set aside, you can pay off the difference between your car’s trade-in value and what you owe out of your own pocket. While this requires more upfront cash, it avoids rolling negative equity into a new loan, which could save you money in the long run by reducing interest payments. This is one of the best ways to trade in a car with negative equity, as it allows you to start fresh without the added financial burden.
3. Trade Down for a More Affordable Vehicle
If you’re open to downsizing your vehicle, trading in your car for a more affordable option can help you reduce negative equity. At Key Scales Ford, we have a wide selection of new and pre-owned Ford vehicles that may fit your budget while also helping you avoid rolling over too much negative equity. By selecting a lower-priced used car, you can minimize the gap between what you owe and your vehicle’s trade-in value.
4. Lease Instead of Buy
Leasing a vehicle can be a great option if you’re dealing with negative equity. Although leasing still involves rolling over some of your negative equity, lease payments are often lower than financing payments, making it easier to manage your finances. Leasing could give you a fresh start, especially if you’re unsure about your long-term plans or need to lower your monthly expenses.
How Much Negative Equity Can I Roll Over?
The amount of negative equity you can roll over depends on your credit, the estimated value of the vehicle you’re purchasing, and the policies of your lender. Most lenders will finance up to 120% to 130% of the car’s value, which includes the vehicle price, taxes, fees, and any negative equity. For example, if you’re purchasing a car worth $30,000, your lender may allow you to finance up to $36,000 to $39,000, including the negative equity.
To better understand how much negative equity you can roll over on a trade-in, it’s essential to work with our finance team at Key Scales Ford. We’ll review your specific financial situation and help you determine the best course of action.
We’re Here to Help You Navigate Your Negative Equity Trade-In
At Key Scales Ford, we understand that negative equity can feel like a financial burden, but it doesn’t have to be overwhelming. Whether you’re looking to roll your negative equity into a new loan, pay the difference in cash, or choose a more affordable vehicle, our finance team is here to guide you every step of the way.
Trading in a car with negative equity is entirely possible, and we’re dedicated to helping you find the best solution. Start by appraising your current vehicle online or contact us today to discuss your options and review the contract to ensure all terms and conditions are clear. We look forward to helping you get behind the wheel of a Ford that fits your budget and lifestyle.
Visit Key Scales Ford today to learn more about trading in your car with negative equity!
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