How do I get an auto loan if I owe more than my car is worth?

An unfortunate reality of financing a car is the possibility you will owe more than your vehicle is actually worth. The most common causes of what is referred to in the car business as "being upside down" are financing a vehicle with excessively high mileage, taking out a very long term loan, and having a high interest rate on the loan. Another very easy way to become upside down on an auto loan is to take out a zero money down loan.

As difficult as being upside down can be, it is very possible to trade the vehicle in and take out a loan on a different vehicle. It is important to mitigate the negative equity in your trade as much as possible when you take out the new loan, to minimize the amount of time you will be upside down on your new purchase. Follow this guide to minimizing your negative equity to make sure your next auto loan remains as manageable as possible.

Put as much money down as possible

This is often easier said than done, but a substantial down payment can reduce the amount of negative equity involved in your new loan. Furthermore, additional money down can reduce the risk of the loan in the eyes of the bank, which may reduce your interest rate. In some cases, you may be able to roll the full balance of your previous loan into your new loan, but it is by no means advised.

Plan on paying more than your actual payments

Paying more each month on your auto payment can pay huge dividends over the course of you loan. Use our auto loan budget calculator to see how much you can save in interest if you contribute more to your payment each month. By increasing how much you pay each month, you will pay down your loan at a speed closer to the depreciation of the vehicle, which will ultimately help your equity position on the vehicle.

Find a vehicle with a large book value that is for sale for substantially less

This is the best way to minimize your risk in being upside down. By taking a loan out for much less than the NADA value of the vehicle, you can be in a strong equity position even before you take the vehicle off of the lot. If you are not familiar with how this works, give us a call and we would be more than happy to walk you through the vehicles in our inventory that you may be able to accomplish this on.

We have found ways of helping customers out of undesirable vehicles that they are upside down in and have lenders who are flexible in helping us accomplish this. Click below to find out how we can help you.