How to Trade a Car When I Owe More Than It Is Worth

Trading in a car when you're upside down on the loan, or owe more than the car's worth, can create a financial hurdle. Even so, it's possible to trade in your car and acquire a new vehicle. Know the options available to you and then choose the solution that best fits your needs.

Instructions

1

Pay a large down payment to compensate for the negative balance. If you owe $10,000 on your car loan and the dealership is willing to give you $7,000 for the trade-in, bring a $3,000 down payment to pay off the negative equity.

2

Roll the negative balance into your new car loan. If you don't have cash for a down payment, negotiate to have the dealer pay off your trade-in and then wrap or include the negative balance or equity into your new car loan. This method increases the final price of your new car.

3

Lease your next car. Because leased car payments are often cheaper than buying, consider trading in your old car and leasing your next vehicle. The dealer still wraps the negative equity into the leased car price, but you'll have a smaller payment. Keep the car until the end of the lease term to avoid another upside-down loan.