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If you want a new car but still have an outstanding balance on your old car that exceeds the trade value of that car, your dealer might be able to cover the difference (negative equity) in your new loan or lease ? as long as the amount is not too great relative to the financed cost of the new vehicle.
So how much negative equity can you roll over? Generally, the more negative equity you have, the harder it may be to roll over on a car loan. Lenders often use a loan-to-value ratio (LTV) to help them set a maximum loan amount. Many lenders won't extend loans that are more than 125% of a car's value.
Sometimes dealers will get ?creative? and find a way to hide the negative equity so that they can get their customer's new loan or lease approved. The dealer will give the customer a higher price for his trade-in and add the same amount to the price of the new car.
Keeping up with regular maintenance and keeping the car clean and in good condition will also help maintain value when you sell it. Leasing or Buying: If you plan to keep a car for less than three years, consider leasing instead of buying. A lease means no loan, which means you can't be upside down.
Get right-side up again Make extra payments. The faster you pay down your loan, the faster you'll eliminate the negative equity. ... Refinance with a shorter loan term. ... ?Drive through? the loan. ... Bury the negative equity in a lease.