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Old 07-27-2007, 07:47 PM   #1
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Default Process of trading in a car while still owing money on it

OK at the end of August I want to trade in my current car for a 350Z and I still owe money on the car. I know I'm about $3000 upside down so I know the $3000 will be added to the new car loan. My question is when I go to trade the car in does the dealer pay my old car off first then submit my application for the new car loan with the $3000 added on or do they submit the new car loan with me still having a balance on the old car?
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Old 07-27-2007, 07:50 PM   #2
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They run your credit first and based on that they should know if they can do business with you. If your credit is bad enough in which you are worried about $3000 dollars then maybe it's not in your best interest at the moment to buy a new car unless of course you are trying to get into something cheaper.
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Old 07-27-2007, 07:54 PM   #3
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No my credit isn't bad I'm just curious about how exactly it goes. I could never find a definite answer to if they pay it off first then get you a new loan or try to get you a new loan while you still have the existing loan then pay it off.
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Old 07-27-2007, 07:57 PM   #4
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They look at your credit first before even sending out the application. These people are in the car business and the finance mangers will know right off if your application will go through with the extra $3000. And to answer your question they will submit the total amount being financed which in your case the price of the car + the neg. equity rolled over. Once you are aproved they wil cut a check to the lean holder and pay off your old car.
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Old 07-27-2007, 08:00 PM   #5
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OK thats what I wanted to know. I was always confused about the whole process. Thanks
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Old 07-27-2007, 10:03 PM   #6
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Its one transaction. The dealer will buy your car. It makes no difference when he takes care of the lien.
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Old 07-27-2007, 10:06 PM   #7
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Just out of curiosity what do you intend to do for a down payment?
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Old 07-28-2007, 05:54 AM   #8
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you shouldn't trade in a car that you owe more than its worth. It makes it just that much harder later to pay the next car off before the wheels fall off.
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Old 07-28-2007, 06:19 AM   #9
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The dealer will show the trade in as negative $3000 on the order form. This just gets added on to the overall balance.

You will sign a form handing your car over to the dealership and they will send a check to the finance company paying off the loan. Dealers prefer to pay the loan off themselves so they know for sure it is paid.

It is not ideal to be "upsidedown" but $3000 neg equity is really not that bad. If you like changing your vehicle often then a lease maybe a better option.
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Old 07-28-2007, 06:28 AM   #10
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Just a word of caution.. if you think you are upside down by 3K then you prolly owe more.. if you used KBB or whatever to obtain what you think is "fair market value" then you will no doubt of looked on the high side..just throwing some wisdom out there for you on what to expect. i see it every day where i work, they tell me its worth $10k (what they saw online etc..) and its only worth say.... $8500 to me (dealer) Negative equity happens alot.. ive rolled $30-$40K into deals but remember also most banks will only allow a dealer to "hide/bury" negative equity into the new car(s) a value of up to 120% (ish) good luck..
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Old 07-28-2007, 07:07 AM   #11
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upside down on your loan = bad idea
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Old 07-28-2007, 07:13 AM   #12
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Quote:
Originally Posted by Black Duck
The dealer will show the trade in as negative $3000 on the order form. This just gets added on to the overall balance.

You will sign a form handing your car over to the dealership and they will send a check to the finance company paying off the loan. Dealers prefer to pay the loan off themselves so they know for sure it is paid.

It is not ideal to be "upsidedown" but $3000 neg equity is really not that bad. If you like changing your vehicle often then a lease maybe a better option.

You're always going to be upside down on a lease if you go over the mileage. If you trade it in before the lease is up it's the same thing. Think about it. You generally at a large dealership can only lease a new car. Once that car is off the lot you loose a bunch of $$. Right off the bat you're also paying a bunch of interest because the money factor rate is most of the time higher than the APR % you would have gotten with you T1 credit. (Yes you have to have good credit to lease). With lower payments, shorter terms, higher rates, and depreciation, you're playing catchup the day you drive that car off the lot. At the end, the residual is also overly inflated. Switching cars and lowering your payment is ideal with a lease but not avoiding negative equity. The only true way to guarantee to reduce your payments on address the negative equity is buy a car that's cheaper and make payments at your current rate. But then nobody really does that until they badly upside down on their car.
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Old 07-28-2007, 07:29 AM   #13
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Quote:
Originally Posted by JDMFairladyZ33
You're always going to be upside down on a lease if you go over the mileage. If you trade it in before the lease is up it's the same thing. Think about it. You generally at a large dealership can only lease a new car. Once that car is off the lot you loose a bunch of $$. Right off the bat you're also paying a bunch of interest because the money factor rate is most of the time higher than the APR % you would have gotten with you T1 credit. (Yes you have to have good credit to lease). With lower payments, shorter terms, higher rates, and depreciation, you're playing catchup the day you drive that car off the lot. At the end, the residual is also overly inflated. Switching cars and lowering your payment is ideal with a lease but not avoiding negative equity. The only true way to guarantee to reduce your payments on address the negative equity is buy a car that's cheaper and make payments at your current rate. But then nobody really does that until they badly upside down on their car.

For the most part this is the rule of thumb to follow... the residuals are oftern inflated yes.. but there are a whole host of other factors working here.. the earlier you look into retruning a lease the more trouble you will be in for sure but half way through and on its worth a look.. we do it all the time.. some manufac's will allow you to buy miles half way through the lease at a discounted price from the penelty rate. (BMW is only a 1 cent charge after you take the car but you can tack on 5 cents if you return the car with out buying more first) it can be done.. its just not always a good idea.. probly one in ten even out, but if you are over in miles and dont buy them along the way atleast... then you gonna get hit in the pocket one way or the other..
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Old 07-28-2007, 07:37 AM   #14
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Quote:
Originally Posted by VoKaL
upside down on your loan = bad idea
Financing itself is BAD idea
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Old 07-28-2007, 08:03 AM   #15
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Quote:
Originally Posted by JDMFairladyZ33
You're always going to be upside down on a lease if you go over the mileage. If you trade it in before the lease is up it's the same thing. Think about it. You generally at a large dealership can only lease a new car. Once that car is off the lot you loose a bunch of $$. Right off the bat you're also paying a bunch of interest because the money factor rate is most of the time higher than the APR % you would have gotten with you T1 credit. (Yes you have to have good credit to lease). With lower payments, shorter terms, higher rates, and depreciation, you're playing catchup the day you drive that car off the lot. At the end, the residual is also overly inflated. Switching cars and lowering your payment is ideal with a lease but not avoiding negative equity. The only true way to guarantee to reduce your payments on address the negative equity is buy a car that's cheaper and make payments at your current rate. But then nobody really does that until they badly upside down on their car.

1. Get the mileage right at the start and over allow. For example if you think you are going to do 12K a year sign up for a 15k a year lease. It is cheaper than paying penalties at the end.

2. When you lease a vehicle, you really have to accept the fact that you are paying the depreciation over 3/4 years and never really own the car unless you buy it at the end (not recommended).

3. Yes it is true, you could get upside down even with the lease but only if you try to get out early. If you see the lease through to the end, you will owe nothing and should be able to swop into another vehicle. Manufacturers will also very often have promotions that waive the last 6 months of the lease if you lease another new vehicle.

4. People who take out loans for 72 months but get bored of their vehicles after 36 should consider the lease.
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Old 07-28-2007, 08:06 AM   #16
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Quote:
Originally Posted by zipgun
Financing itself is BAD idea
Why? Even if you have the money, you would be better off leaving it in the bank to gain interest or for a rainy day.
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Old 07-28-2007, 09:34 AM   #17
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Well I don't mind being alittle upside down since I really don't plan on buying another car after this one, if I do it'll be a VERY long time away. The 350 is originally the car I wanted the first time but I didn't have any credit before but I got my father to co-sign on my existing car which was a very hard thing to do so I took what I could for the time being. I only average 8000 miles per year and I want to get a 03-04 Z with no more than 25-30000 miles. I wouldnt ever consider getting rid of the Z before 100000 miles. I heard you can get 200000 miles out of the well maintained Z with no problem. At 100000 miles if I've had no major problems with the Z I'll keep it but if I do I'll get rid of it. In the city where I live everything is so close together thats why I don't average many miles per year plus I don't really go out a whole lot besides work which is 12 minutes away. So if the car has 30000 miles already it'll take me 8.75 years to get to 100000 miles. I'm not the type who has to keep up with the Jones' the 350Z is what I've always wanted so I know I'm not gonna trade again before it's paid off just because something new came out. So I really don't mind being alittle upside down beacsue if I finance for 5-6 years I'll be paid off well before it its 100000 miles anyway. And my average would be even lower because one year I drove 350 miles to indiana twice which added 1400 miles and I'll never do that crap again EVER!
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Old 07-28-2007, 11:12 AM   #18
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Quote:
Originally Posted by Black Duck
Why? Even if you have the money, you would be better off leaving it in the bank to gain interest or for a rainy day.

LOL Whats that got to do with this? You can save money by catching the bus too...Who said anything about investments?

We were talking strictly about buying a car (which in itself is NOT an investment)

Rainy days, building credit and emergencys aside, bottom line is dollar for dollar buying a car in cash, would be much less than buying one with monthly payments+interest...
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Old 07-28-2007, 11:30 AM   #19
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Quote:
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LOL Whats that got to do with this? You can save money by catching the bus too...Who said anything about investments?

We were talking strictly about buying a car (which in itself is NOT an investment)

Tell me where I said anything about investments???? All I said was you never know when you could use the money so it is better off sat in your account.

Anyways.....as you say a car is NOT an investment (unless it is a classic) so why plough all your money into it when you could get a fix low rate loan.
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Old 07-28-2007, 11:47 AM   #20
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Quote:
Originally Posted by Black Duck
Tell me where I said anything about investments???? All I said was you never know when you could use the money so it is better off sat in your account.

Anyways.....as you say a car is NOT an investment (unless it is a classic) so why plough all your money into it when you could get a fix low rate loan.

Quote:
Originally Posted by Black Duck
Why? Even if you have the money, you would be better off leaving it in the bank to gain interest or for a rainy day.


Dont you know that gaining interest is investing your money?

Why plough all my money into a car?? Well for one thing when I buy a car its not all the money I have, its money set aside for just for buying a car.

Dude for the last time ALL Im saying is if you buy a car in cash you pay less period... Dont think so? Check/add your total payments. I like everyone else financed crap in the past too ya know, ask anyone paying or making some sort of payments... INTEREST bites..

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Old 07-28-2007, 11:47 AM
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