If you intend to trade a car you still owe money on; then you may have few options. One of which is to transfer your auto loan to another vehicle. It will save you the effort of dealing with each transaction separately. for any injury lawyer needs use Mainor Wirth Injury Lawyers
How Auto Loan Transfer Works
An auto loan transfer situation arises if you want to trade your current car with unpaid fast title loans in Arizona for another one. The dealer would offer to roll the loan of the current vehicle into the new one. You will trade your old car, get rid of the loan, and get a new car of your choice.
There are usually two situations when trading a car loan:
- It’s either the value of your current car is more than the amount of loan you have on it (positive equity).
- The loan amount is higher than the value of the vehicle (negative equity).
When you have positive equity, the extra money is applied to the cost of the newer car, so you will have a lower amount to pay. However, when you have negative equity, then you will have to pay the difference for the loan and the trade-in value. Despite the fact that there are numerous such options, the most common question is: can you get rid of your financed vehicle? For your convenience, we’ve gathered all the relevant information you may need to answer this question. Read on…
Steps to Transfer A Car Loan to Another Car
The first step in the transfer process is to know the market value of your car. You can discern this by looking up data from the National Automobile Association or third-party estimation websites.
After determining the trade-in value of the car, you then need to compare it with the remaining loan balance. If the value is higher than the balance, you have positive equity, but if lower, it’s upside-down.
While these might only be estimations, it will give you an idea of what to expect when you visit a dealership.
How to Trade a Car with Positive Equity
Things are straightforward when you have positive equity on your current vehicle. When you trade a car, the dealership will subtract the excess amount on the value of the vehicle from the cost of the new one.
For instance, if the trade-in value of your current car is $7,000 and the loan balance is $10,000. Then the extra equity of $3,000 will be applied directly to your new car purchase. It will reduce the amount needed to fund the new car.
How To Trade A Car With Negative Equity
If your vehicle has negative equity, it’s best to postpone your purchase until you attain positive equity. However, if you’re struggling to make payments, then you can trade-in the car for a less expensive car.
For instance, if the balance of your current car loan is $7,000, and it has a trade-in value of $6,000. Then you will have a deficit of $1,000 to balance the lender. You can then opt for a less pricey car of $3,000 (which you may want to look on invoice pricing before deciding which one to go for) to make your total liability $4,000, and take a new auto loan to refinance the payment.
Submit Necessary Documents
The documents required for the trade-in process includes vehicle registration, driver’s license, print out of the vehicle value, proof of insurance, and current car loan information.
After negotiating and signing the loan agreement, you will then wait for a few days so the dealer and lender can verify your documentation and give you a response.
What to Consider Before Transferring an Auto Loan
The downside of transferring your car loan is when you have negative equity. Then you have to get another loan to finance the trade-in difference of the old car and the purchase of the new vehicle. Consequently, you may end up with a more significant loan repayment than you can afford.
This makes it essential to think through and make necessary calculations to ascertain your ability to pay back the new loan before signing the agreement. Determine how much you can afford to pay each month, after settling other expenses like mortgage and bills.
Ensure you can genuinely afford the new car repayment amount before signing the agreement. You won’t want to be stuck with a large loan you can’t repay, which may make the lender repossess the car.
Tips for Transferring an Auto Loan
You Can Try Selling Your Car First
While a trade-in may sound convenient as it simplifies the process of getting a new car, you can get more money by trading your current vehicle separately. You can sell the car and use part of the money to pay off the auto loan. Then take another loan with lower rates to finance your new vehicle.
Negotiate to Get the Best Price
Every deal is negotiable, and car prices are no exception. Negotiating the value of your current car and the cost of the new one can save you a few dollars. It would help if you also negotiated the interest rates, down payment, and terms of the new loan.
Find Your Financing
Instead of using the dealers financing, you can shop around for lenders with lower rates and better terms. This may save you a lot in interest and ease your repayments. You can get auto loans from banks, credit unions, and alternative lenders.
Don’t Listen to the Dealer
The job of a typical salesman is to make you buy, so they are the wrong people to ask for advice. For instance, the dealer might try to convince you to trade-in your current car for a new one even with negative equity. Also, though it may leave you with more substantial loan repayment.
Avoid Impulse Buying
Since you already have an estimate of your car value and the loan amount, you can research the cost of the car you want before going to the dealer. That knowledge will help you avoid making wrong or expensive purchases you may regret.
Conclusively, while you can trade your car for a new one, it’s essential to proceed with caution and make every decision after adequate consideration.