The Effects Of Trading In A Car When Buying A New One
Are you tired of the car that you currently have? If so, are you considering upgrading to a newer one? You can shop for a new car any day of the week, and you will find hundreds of vehicle choices. When you decide to get a new car, will you need an auto loan? If so, you might want to learn more about how a trade-in will affect your new loan. Here are several things you might want to know before trading-in your old vehicle.
You Must Pay Off Your Current Loan
You must always pay off the existing loan on a vehicle that you trade in. When you trade in a car, you are giving the car to the deal with the title. You will not have the title if you owe money on the car, though. The dealer cannot do anything with this car if they do not have the title. Therefore, when you trade in a car, the dealer will have to pay off the existing loan, and they will figure this into the deal.
Many People End Up With Deficits
The downside of trading in a car that you owe money on is that it might not be worth as much as you owe. If you owe $3,000 on the car, you will have to pay a deficit if the car's value is only $1,000. The deficit is the difference between the car's value and the amount you owe. If you have a deficit when trading it in, you will have to pay this extra amount. You will not have to pay it out of your pocket, though. The dealer will add it to your new auto loan. Therefore, if you buy a new car for $20,000 and have a $2,000 deficit, your new loan will be for $22,000.
You May Need a Down Payment
Many people do not think they will need a down payment when buying a new car if they trade one in. They feel that the trade-in is the down payment. In some cases, this is true. It is not true, though, if you have a deficit. If you have a deficit, you might need some cash down for the lender. The lender might require it.
If you have questions about getting a new auto loan while trading in a vehicle, contact an auto loan lender. They can answer all your questions before you trade your car in for a new one.
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