A man is standing near his silver SUV with 4 doors

Using My Negative Equity Trade-In as a Down Payment

Milad Hassibi June 17, 2018

If you are considering buying a new car, you will need a down payment. Even if your dealership does not require one, we highly recommend you provide one. A down payment will actually lower the amount of interest you pay on a car.

This is because a larger down payment means fewer payments, which translates into less interest paid.

But how can you trade in a car if you still have a loan for it? It all really depends on the equity. ToA woman is smiling about her trade in find your equity in a car, simply use a website like www.kbb.com to find the value of your car, often referred to as ACV or Actual Cash Value.

Take the ACV and subtract the amount owed to find the equity stake you have in your car.

As an example, if the value of your car is currently $10,450 and you still owe $7,000 in payments, your equity stake in the car is $3,450.

If you get a negative number in your answer, that means you have a negative equity stake in the car due to its depreciation.

If you are underwater in a car loan, here are some actions you can take:

Negative Equity Trade InĀ Options

Pay Up

If your negative equity isn’t too high, you can payoff the difference. This is suitable for those that have enough cash to do so. Do not go out and get another loan to cover your negative equity.


One option is to simply wait on your equity stake to become positive. This will take time, but now you will not be held back by your old car loan. This can make getting financing from a lender much easier as well since you won’t have a negative equity stake hanging over your head. This can also allow you to save up for a larger down payment as well.

Roll It

Lastly, you can try to have your old loan roll over to the new one. This can be risky, so some lenders steer clear from this type of lending. Although this may be the most simple option, you will now burden yourself with the new car loan and the amount you will need to repay for your old car.

How to Avoid Negative Equity

Negative equity holds many Americans back when it comes to buy a new car. One of the best ways to combat negative equity issues is by providing a large down payment up front. A down payment of 20% or more will help offset the impact of negative equity.

Final Note

If you have been looking for a new car but have less than ideal credit, CrediReady can help. Our nationwide network of trusted dealers and verified lenders work with buyers in all credit situations. Take a moment to fill out our free no obligation loan inquiry form today to start shopping for the car of your dreams!

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