Before I go to the bank and make a fool of myself asking silly questions, I thought I’d ask around here first.
Is it typical, or atypical, to be able to get a car loan to which has been added the remaining pay-off amount on your current car? So for example, if I have $3000 left to pay on my current car, and I’d like to buy a new $15,000 car, can I typically get a car loan for $18,000 to both pay off the old car and buy the new car? Or would this kind of thing typically not fly?
Of course different places are different, but I just want to know what’s typical in the industry.
Yes, trading in a car where you are upside-down in equity is common. It’s also one more number for the dealership to easily confuse you with. With every option the salesman gives you, remember your actual amount to be financed is the price of the new car plus what you owe on your trade minus your down payment minus what they’ll pay you for your trade.
Your salesman would like to gloss over all that and say ok, here’s what you monthly payment will be on all that. Sign here. Even if you dicker that monthly down a little, you’re likely to still be way overpaying. Way. Then they’re going to hope you don’t notice the term of the loan (how long you’ll be paying) of the interest rate being used.
Negotiate each of those figures that you can. Your payoff is a constant, call your car loan people for it before you go car shopping. Your down payment is more or less a constant in that you will have a lot of say as to what you’re willing and/or able to put down. The price of the car and what they’ll pay you for your trade are not constant, and if you don’t negotiate them you’re accepting their worst offer. Negotiate the above to your satisfaction and DO THE MATH on the above and WRITE DOWN the toal amount to finance. Make sure the salesman agrees your math is correct. Be suspicious if he doesn’t. Having that, ask him what he can get you for a percentage rate and term of months on a loan. Negotiate that too.
Remember, if you get a 36 month loan and/or make a substantial down payment you’re much less likely to be upside-down next time you need a car. The longer your term and the less the down, the more likely you’ll be in that spot again.
Also, be sure to get in writing that they will pay off your loan. Many times this gets lost in the details, you get and offer that’s too good to be true, and that’s why, they’re not paying off your loan.
and we wonder why we get in this credit mess…
(just a suggestion, though. I would expect them to seriously bump up the interest rate to account for their undersecuritization… it may not be worth it)
So, I’m not actually upside down. So maybe there’s some obvious thing I’m missing that makes what I was thinking would be an okay idea actually a bad idea.
Actual numbers: I owe $3500 on a car which I could sell for $6000 or $7000 or so. My family has an unexpected need for a second car. I was looking at some cars valued about $15000 or so. It was going to be difficult for us to simply buy the new car, with payments of $300 a month or so, while still paying the $250 a month we currently pay over the next year and a half. So I was thinking, what if I could add in the $3500 I currently owe to the new car loan. Yes, I’ll pay more on the $3500 in the long run (having stretched it out over the next four or five years, paying interest the whole time) but I may need to do this to make the payment for both cars affordable in the short run.
Okay, but you said it’s common to roll in the old car’s payoff when its upside-down. Is there some reason it would be a good idea to do this when it’s upside-down, but not when it’s not upside-down?
As to the rest of your post, that’s good advice. I listened to the “here’s your monthly payment” line the first time I bought a car, realized a week later what a schmuck I’d been, and since then have always gone in with specific price in mind and cash on hand (via a bank loan) to finance. Negotiation is in terms of price, not in terms of payments.
Yes, this was something I was worried about, but I figure the only way to find out is to actually go in and ask about the interest rate both with and without the old car rolled in.
If you have equity in the car, you may be able to find someone who would willingly give you a package-deal financing as a condition of buying a new car.
they could also effectively work it as a sell-back, maybe. Regardless of how its done, it’s not exactly vanilla financing and you’d need to find someone who really wants to sell you a new car.
Do you live in the real world, dude? The loan is under-securitized the moment most people drive the vehicle of the lot (esp with zero-downpayment options), and within a year it’s WAY under-securitized.
On a 15k car, at 6.5% interest, 100% financing, and 60 month repayment term, you will pay 2624.17 in principal on the loan the first year of the car loan.
That represents 17.5% of the value of the car. in year 2, you have repaid 36% of the principal balance.
What you are asking is common if you are trading in your old car, which is why people do it when they are upside down, they can’t just sell their old car. But if I understand correctly, you want to keep your old car. That is I think less common. If you are trying to save money each month by stretching out the loan on the first car, I think you are better of going to a credit union and getting a new loan. You’ll likely get a better rate (and deal) on your new car loan if you don’t involve your old car.
I understand what you’re asking but I doubt a dealer would be willing to do this.
A bank may be a better option. They may be willing to be the leinholder for two vehicles at the same time under one loan.
Sure, I’ll try again. Do you think they invented a term (upside-down) for the common case of owing more than your securitized value if it was uncommon? It’s really damn common, in fact it happens all the time, and is not abig deal in the car loan business.
the point is that upside-down refers to negative equity due to subsequent market conditions - not a loan that was ab initio partially unsecured.
one is an (unforeseen) consequence of future market conditions. one is a dumb loan to make, but made nonetheless because of another business need (i.e. they need to sell cars)
Really? Is that why I can finance a car just about anywhere and still end up upside down? If what you were saying was true, the only place you would be able to get loans on cars would be from the car company’s finance arm itself. But it’s simply not true and you’re repeated claims just make you lokk like you have no connection to reality whatsoever.
sorry if you can’t see the difference between financing a depreciating asset and giving financing for greater than 100% of the initial value of the asset.
Sorry if you don’t realize there is an incredible variety of financing instruents out there. Heck, we even have these things where you swipe a little plastic card and WITH NO COLLATERAL AT ALL they extend you credit. Unheard of!
would there be more risk in such a transaction? Sure, which is why my credit card rate is around 13% instead of 4%, but there are plenty of choices and your idiotic assertion that no wise lender would make such a loan is patently based on a world outside of the real one.
Yes, and surprisingly, several years ago when I contacted my bank for an auto loan an a used car, they simply decided to give me an unsecured personal loan instead for $15,000 and even gave me some additional cash out, at a fixed rate of 5.5%. And they didn’t even ask for a single piece of documentation from me. On top of that, they also ended up sending me a credit card in the mail with a limit of $3600 (which I never asked for or even wanted). Of course, this was back in 2006 and I suppose things have changed quite a bit since then.
