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Home >> Lending >> Vehicle Loans
How to Finance a Car
I am looking to buy a used trailblazer '08 with low miles. I hate my car, and have had it only a year. I still owe $14,000 on it. I am willing to take $7,000 on to the other vehicle, but can't seem to figure out how to do this. The '08 I want is only $12,000; any suggestions? I have good credit.
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 If you can't sell your car for what is owed on it, you will need to pay the difference, assuming it must be sold to buy the new one. That means either you put up the difference in cash to retire the current loan, the amount you are short gets added to the new loan, or a little of both.
In some cases dealers would add the amount you are short to the new loan, secured by the new vehicle. For this to happen you must have the value in the car. The hard part is getting such a good deal on the new car, that it can handle this additional amount. If the car is really worth that, the dealer wouldn't be selling it at such a discount.
This is how people get "upside down" in car loans, meaning they owe more than they are worth. There was a lot of this at mid-2008 when gas prices soared. SUVs and other gas hogs were selling at half book value, meaning book values were wrong.
Pay the difference after you sell or trade in your car. You'll get a better price selling it yourself. Don't add any amount to a new loan and finance as little as possible to prevent this from happening again. You may be financially best off living with what you have now.
Published on BankingQuestions.com 1/30/09
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