Transfer of Negative Equity into a New Car Loan
When you exchange or buy a new vehicle, the dealers will take care of your loan. Although it sounds great, this method is not a good solution if you want to sell a car with negative equity and profit from it.
How does it work? If you roll over negative equity into a new automobile loan, the dealer pays your lender the rest of your loan. And you should be prepared that they will either add this amount to your new loan or deduct it from your initial payment. The most dangerous thing about this method is that you are actually starting one more loan with negative equity. This exposes you to a significant risk of being in the same situation again and falling into a hopeless vicious circle.
Transfer of Negative Equity into a New Car Lease
This method is only suitable for those who want to rent the next car. The best thing about this option is that once the lease expires, you are not forced to continue paying negative equity debt. However, be prepared for the fact that you will probably pay more for rent. This option is much less dangerous and risky than rolling over the negative equity into a new auto loan because you don't have to worry about going into a deep debt hole.
Covering the Difference out of Pocket
If your budget and financial situation allow it, then definitely the best solution is to repay the loan and completely get rid of negative equity. This option frees you from debt rather than simply transferring it to a new loan. To pay off the negative equity, you must repay the difference between the unpaid rest of the loan and the appraised value of your automobile.
Selling a Vehicle in a Private Way
This way of negative equity car trade-in is definitely not the easiest, but still the most profitable one. In some situations, selling to a private buyer can provide a benefit of thousands of dollars. This means that a private sale of a vehicle at an inflated price will allow you to earn and pay off your negative equity.
Keeping the Car and Postponing the Sale
In practice, postponing the sale is one of the best ways of trading in a vehicle with negative equity. If you choose to wait until the loan is paid off in full, you can use previous payments as an initial payment on a new car.
This method to trade in a car with negative equity is definitely not suitable for those for whom the urgent purchase of a new vehicle is critical or whose automobile needs serious repairs. You should weigh the price of necessary repairs against the financial benefits of not selling your old auto.
