We'll pay off
your trade . . . no matter what you owe!
Author: LaChelle
Neudorfer
Sounds
like a great deal doesn't it? Even sounds like free money! Well, it's not free,
far from it.
"We'll pay off your trade" translates to "We'll
refinance what you owe on the car you are driving now and roll it over into the
car you buy from us."
Since you already have financing on one car,
they assume you will be financing through them as well. You are "pre-qualified" in their eyes for another loan. That dealership will not only be making money
off the car you are buying from them (which they have every right to), but they
will also be making money off of your trade-in. You will be paying for two cars,
but only taking home one.
Some people will do anything to get into
a new car and dump their old one. Even if their car is in good condition with
lots of life left, people are always itching for something new.
If
you are already in a negative equity situation (you owe more than what someone
is willing to pay you) you are guaranteed to be in the same situation or even
worse after you buy your new car.
Dealerships who will pay off your
trade no matter what you owe are not your friends. They do not care about your
repeat business. As a matter of fact, you will be cursing their name if you try
to trade that car in within the next couple of years.
Don't get me
wrong, rolling over negative equity is not always a bad thing. A good dealership
with reputable finance companies usually won't let you roll over negative equity
that is more than 10% of the car you are buying. This means that if you are buying
a car for $20,000, you can only roll over $2,000.
This may be hard
to do at the time, but you will be in a better financial situation in the long
run.
How to Avoid Negative Equity