If your upside down on your car loan, is it worth it to buy a new car?

Just how does this work, I owe $10,000. on a kia that blue books foe $7,000. The engine is blowin and that will cost around 4,500. Saw this thing on TV that says We will pay off your old vehicle and put you in a new one and you just pay the the differance from trade in value. what is this all about and has anyone of you ever done this?

The first answerer is right, though perhaps not as coherent as you desire.

It is not worth it.

Pay off your Kia or sell it privately. Because yes, the dealer will roll the owed amount of your car into the new car’s loan amount, leaving you even MORE upside-down by the time you drive off the lot.

Remember, a new car will start depreciating quickly as soon as you drive it off the lot. But even if it didn’t depreciate at all, you’d still be toting around $10,000 of extra debt over and above what the car is worth– and that’s assuming it’s actually WORTH the price the dealer suckers you into paying for it.

I’d be looking for a way to scrap this Kia and pay it off. In the mean time, be looking for a fairly reliable used car and pay cash for as much of the purchase price as possible. If your engine is blown in your current Kia, trust me, no dealer will want to touch it when you tell them it’s your "trade-in"– not even with the proverbial 10-and-a-half-foot pole.

See if you can part-out your Kia, perhaps. Strip it down and sell the parts individually. Do NOT take the whole car to the scrap yard and sell it based on its weight. There are some components in there– the catalytic converter, power window regulators, starter, alternator, etc– that might be easily sold on eBay or Craigslist to another desperate Kia owner or parts breaker. The catalytic converter would bring a handsome sum at the scrap yard, in comparison to its relatively small size.

So to sum it up:

(1) Do not expect them to "pay off what you owe." They’ll just tack most of or all of that amount onto any new car you purchase.

(2) Keep the Kia and part it out.

(3) Buy a decent-quality used car to get you back and forth to work/school/whatever. Pay cash for it if at all possible– if not, take as small a loan as you possibly can.

(4) Pay off the balance of the Kia loan as quickly as possible. Use proceeds from the parting and scrapping of the car to pay it off more quickly. Continue making your payments as normal until you’ve saved up enough money to completely pay it off.

7 Responses to “If your upside down on your car loan, is it worth it to buy a new car?”

  1. Karle says:

    they sure will…… they just add ur current vehicle price to the new vehicle price.. so in other words u still pay for the vehicle u got now + the new 1 its just in 1 payment instead of 2…..
    References :

  2. friedach says:

    you’ll be lucky to $2.5K tradein value, then you’ll be up for both cars and finance. perhaps you should have looked after the Kia better. They are trash, but sane driving helps a lot. Kia’s aren’t expensive, to kill a motor that quick is just inane! Tie a Zeplin to your right foot!!!!
    References :

  3. N says:

    IF they make a deal and your credit is perfect, they will pay it off and tack on the additional.

    However, in the real world, that might happen for people who are upside down $500-1500,

    Not $5000+ as you are.

    So chances are you CANT do that but even if you could it would be a terrible idea. You are in a hole and you don’t get out by digging a deeper hole.
    References :

  4. ElGrande says:

    The engine’s blown? I doubt it will bring $7K at trade-in time, then.

    Let’s assume you’re $5K upside down. That $5K has to go somewhere on the new loan. Contrary to what the dealer’s commercial says, it doesn’t magically go away. It’s either:

    1) absorbed by a large incentive on the car (which defeats the purpose of the incentive)
    2) paid in cash by you
    3) rolled over into the new loan

    A few years ago, #3 above was the most common choice. However, people would find themselves even more buried in their cars each time they traded. Banks kept overallowing these negative equity loans, and *BAM*… credit crisis. So, for about a year or so now, they haven’t been overallowing on loans at all, even with spectacular credit. You’re not going to find any lender that will overallow $5000 or more onto a new loan.

    The old TV commercial saying "We’ll pay off your trade, no matter how much you owe!" doesn’t mean that the particular dealer has a room in the back full of cash and can magically erase negative equity. It’s a "hook", made to get you into the door. If the dealer can make a deal with your upside-down trade that a lender will sign off on, then that’s the deal they’re speaking of. Unfortunately, in this market, it’s not common any longer.

    **EDIT — Banger… if she still owes on the vehicle, then parting it out would be illegal…
    References :

  5. vrrJT3 says:

    Who declared the engine blown? What are the symptoms of the blown engine?

    It would make more financial sense to just replace the engine if indeed it is the problem. But $4500 is a little expensive for a remanufactured engine.

    How do you still owe $10,000 on a Kia that’s too old to be under warranty?
    References :

  6. ken k says:

    think about the way you got upside down/first of all your hard on cars/and you owe much more than that stove is worth/let the stove be repoed/in between buy a car local for cash and try it in somebody elses name/you need some finesse to get this worked out/if you do not have tangible assets thats the way out/when the dust settles/work out deal with finance co/inbetween only drive what you can afford and stop the dreaming/there aint nobody in the car business with your last name and you call him dad/all the rest are only out for the money/how you end up nobody cares
    References :

  7. Banger says:

    The first answerer is right, though perhaps not as coherent as you desire.

    It is not worth it.

    Pay off your Kia or sell it privately. Because yes, the dealer will roll the owed amount of your car into the new car’s loan amount, leaving you even MORE upside-down by the time you drive off the lot.

    Remember, a new car will start depreciating quickly as soon as you drive it off the lot. But even if it didn’t depreciate at all, you’d still be toting around $10,000 of extra debt over and above what the car is worth– and that’s assuming it’s actually WORTH the price the dealer suckers you into paying for it.

    I’d be looking for a way to scrap this Kia and pay it off. In the mean time, be looking for a fairly reliable used car and pay cash for as much of the purchase price as possible. If your engine is blown in your current Kia, trust me, no dealer will want to touch it when you tell them it’s your "trade-in"– not even with the proverbial 10-and-a-half-foot pole.

    See if you can part-out your Kia, perhaps. Strip it down and sell the parts individually. Do NOT take the whole car to the scrap yard and sell it based on its weight. There are some components in there– the catalytic converter, power window regulators, starter, alternator, etc– that might be easily sold on eBay or Craigslist to another desperate Kia owner or parts breaker. The catalytic converter would bring a handsome sum at the scrap yard, in comparison to its relatively small size.

    So to sum it up:

    (1) Do not expect them to "pay off what you owe." They’ll just tack most of or all of that amount onto any new car you purchase.

    (2) Keep the Kia and part it out.

    (3) Buy a decent-quality used car to get you back and forth to work/school/whatever. Pay cash for it if at all possible– if not, take as small a loan as you possibly can.

    (4) Pay off the balance of the Kia loan as quickly as possible. Use proceeds from the parting and scrapping of the car to pay it off more quickly. Continue making your payments as normal until you’ve saved up enough money to completely pay it off.
    References :
    Plenty of experience dealing with car salesmen, for starters. Also plenty of experience paying off cars early or paying cash for them.

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