Negative Equity is a common occurrence in the car dealership environment. It is simply when you take your vehicle for an auto loan and want to trade it for your next car but the value your car dealer quotes is less than the price of the new car you are planning to get. Some car dealerships accept vehicles with negative equity with strict protocols to approve the deal such as evaluating the value of the vehicle and the borrower’s credit. This means the borrower will need to provide the necessary documentation and bring the car along to determine its value in the current market. Let us know ‘Car Dealerships That Accept Negative Equity’.
You are more likely to have a negative-equity vehicle if you’ve just purchased one since cars tend to depreciate over time. You should not bother about this unless you want to get an auto loan with your present car.
Top 15 Car Dealerships that Accept Negative Equity
Sales reps from different dealerships claimed that negative equity vehicles can be accepted. However, if the dealership only focuses on selling a brand, they will accept your negative equity vehicle after evaluating your credit score and the value of the vehicle.
If your car belongs to any of the brands below, it will most likely be accepted by car dealerships;
- Acura
- Honda
- Jeep
- Nissan
- Toyota
- Ram
- Ford
- Cadillac
- Chevrolet
- Chrysler
- Genesis
- Dodge
- BMW
- Buick
- GMC
How to Trade In a Car With Negative Equity?
While trading a negative equity vehicle, you should expect the normal regular trade-in process. You will have to submit necessary documentation such as car title and registration, proof of insurance, VIN, and a lot more. Usually, when a car dealership trades with a new car purchase or negative equity, it implies that existing loans are cleared and rolled into another new loan. However, you may choose to clear your outstanding loan beforehand. Negative equity limits vary from one car dealership to another. Car dealership A may accept something above what card dealership B approves. Though, a good credit score will always give buyers an edge.
Note: Negative equity does not get cleared when you trade-in with your previous vehicle. Instead, it rolls into the new loan of your newly financed vehicle. As stated above, you can clear your outstanding loan
Before the trade-in prevents negative equity from adding up to your new loan.
How to Avoid Negative Equity?
Negative equity issues can be fixed by paying off your outstanding loan and when you pay your full-term loan within the stipulated duration. However, you can also reduce the effect of negative equity through the following ways;
- Purchase a pre-owned car
New cars tend to depreciate slower when compared to an average new car
- Don’t exceed the mileage limit
When you maintain a car in good condition and do not exceed the mileage limit, It stands a good chance of having a good price3 value in the market since its tears and wear are minimal.
- Deposit high payment.
When your deposit is higher than the remaining balance in the contract, you own more equity and this will minimize your chances of owing more than the value of your car
- Settle your Bills on Time
Settling your bills on time will enable you to pay a larger amount over a period of time to clear out the debts. This will help you get out of debt and positive equity will not be far-fetched.
What to do if you have negative Equity ?
Do not panic, Negative equity should not give you a headache. Below are things you can do if you have negative equity;
- Keep Paying your monthly installment.
If you do not wish to change your car and you can still afford the payment, we recommend you keep paying the installment till you’re able to clear the bills and settle negative equity at the end of the finance contract.
- You can terminate your agreements.
You can cancel your agreement by returning the car to your lender. But, this is only possible if you had paid back at least 50% of the total finance. This method is called “voluntary termination” and works mainly for people who are struggling to make their monthly finance payments.
Conclusion
Negative equity is quite common in the car dealership industry since newly purchased cars tend to depreciate quickly. Some dealerships do not accept negative equity for auto loans while some accept it with certain conditions. In addition, Negative equity can be avoided in most cars if you maintain them and buy pre-owned cars which tend to depreciate at a much slower rate. We hope the guide above will help you make the best decision.
Frequently Asked Questions
- What is the most negative equity on a car?
The most negative equity on a car occurs when its vehicle loan is more than 125% of its value. Negative equity will always surpass the value of a new car since they tend to depreciate in value when rolled over loans are added to the total balance of the next auto loan.
- Is it better to pay off negative equity?
Of course, it is a good idea to pay off negative equity because the faster you can bring down the loan on your car, the more you will be able to secure another auto loan before your vehicle depreciates below the standard level.
