how does trade in work

[ekelly4200]

I have no clue what the process is to trade in a car. We are *almost* even with what we owe vs what its worth. If we trade it in for another is it the same loan or is it a new one? Mechanically our car is fine and affordable and decent rate (9%, preBK) but too small for our family of 5 which includes 1 carseat and 2 boosters. So I can survive with it if need be but really want something bigger. Also we are not discharged yet so not sure if trade ins are allowed yet.

[CATCHMEIFYOUCAN]

You'll pay off the original LOAN (the trade-in) and they'll restart you on another loan. Kind of like "refinancing," whatever you owe on original loan, it will be paid off, and a new loan will be opened.

Catchmeifyoucan

[ekelly4200]

SO what happens if I owe more than its worth at trade in? Is the extra amount rolled over into the new loan?

[CATCHMEIFYOUCAN]

When I refinanced my car, the extra amount was added to the new loan. So YES!

Best Wishes, Catchmeifyoucan

[HHM]

SO what happens if I owe more than its worth at trade in? Is the extra amount rolled over into the new loan?

However, you really want to avoid doing this if you can. Rolling negative equity into new car loans becomes an endless trap, and can easily nudge someone over the edge to financial instability. Also, you can typically do negative equity roll overs with "new" cars only, plus dealers can use new car manufacturer incentive money to absorb some of that negative equity. Unless the amount of negative equity is small, most car finance companies will not roll negative equity over on a "used" car loan. Finally, it will be difficult to roll over negative equity if you are credit challenged, so just don't get your hopes up.

But as has already been described, when you trade-in a car, what happens behind the scenes is the dealership pays off your existing car loan, and you drive off in a new car, with a new loan.

Although, you need a bigger car, I think you need to do some research and be VERY realistic about how much car you can afford.