With rare exceptions, cars decrease in value with age. Depending on other factors, like accidents, repairs, or other damage, the value of a car may decrease even faster. If you borrowed money to buy a car, you might owe more on your car loan than its current value. When that happens, you have negative equity in the car. Some car dealers say you won’t be responsible for the remaining balance on your old car loan when you trade in your old car. But that might not be true. Dealers sometimes just roll over the negative equity into your new car loan, so you still end up paying it.

Step-by-step explanation:

Say you want to trade in your car for a newer model.

Your loan payoff is $18,000

Your car is worth $15,000

You have negative equity of $3,000. That must be paid if you want to trade in your vehicle. If the dealer promises to pay off the $3,000, it shouldn’t be included in your new loan.

But some dealers

add that $3,000 to the loan for your new car

subtract the amount from your down payment

or do both

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3 years ago