Trade in and Buy new??

firemartinez1980 — Thu, 19 Sep 2024 01:56:27 GMT

This may sound stupid, but how can I get preapproved for a new auto loan when I currently have an auto loan? Will the banks overlook the current vehicle basically? I will trade it in and the trade amount is what the payoff is, so it will basically cancel itself out. How does this work?

Re: Trade in and Buy new??

pizzadude — Thu, 19 Sep 2024 14:04:17 GMT

@firemartinez1980 wrote:
This may sound stupid, but how can I get preapproved for a new auto loan when I currently have an auto loan? Will the banks overlook the current vehicle basically? I will trade it in and the trade amount is what the payoff is, so it will basically cancel itself out. How does this work?

Yeah that's pretty much it, your new monthly payment will be based on the amount you're borrowing, which would take into account a trade-in value for your current car.

Re: Trade in and Buy new??

dfwxjer — Thu, 09 Jan 2025 17:13:28 GMT

@firemartinez1980 wrote:
This may sound stupid, but how can I get preapproved for a new auto loan when I currently have an auto loan? Will the banks overlook the current vehicle basically? I will trade it in and the trade amount is what the payoff is, so it will basically cancel itself out. How does this work?

The underwriter will stipulate that the vehicle must be traded in as a condition of the loan, and will essentially remove it from their DTI calculations.

Re: Trade in and Buy new??

DebbsSeattle — Sat, 01 Feb 2025 17:34:41 GMT

I know this thread is old, but for future readers, I'm chiming in. It has been a hot minute since I left the car biz but here is my previous experience. An auto lender typically allows one vehicle to be financed at a time for each adult driver on the credit app. As always, income, credit, DTI and current auto loans may allow for exception. A single adult that has a current auto loan will usually need to trade in the vehicle with a loan in order to purchase. If it is a passenger vehicle and the buyer wishes to acquire a truck, they may allow the second loan if: number of payments remaining are few and the borrowers income, credit , DTI and auto loan performance are all good. If this is what you want to achieve the likelihood of getting a second loan may be increased if the story aligns with the goal...such as my teen driver is graduating and going to college in June, I need another vehicle so that they can have my Accord and I will get the new truck.

Same if you and a spouse have two loans, one with 10 or fewer payments remain, and you wish to add a third vehicle. We have two cars and need a truck...or...little Joey will need a car as he is turning 16 so we intend to let him take one of the old cars and mama gets a new one.

if you are just one of one, do not have a need for a second car and all the other details are just average, you be asked to trade car #1 as a stipulation of loan approval.

Two ways of going about it: An auto dealer usually works with dozens of lenders. They sell cars and write deals all day every day. They see the car buyer as a data set rather than a person the same way a surgeon sees a patient on the table as a liver, spleen or heart patient vs. a naked lady with all her bits exposed. If you have sticky parts in your credit file they will be able to examine them and say " I'm submitting them to ABC Credit Union because that loan officer owes me one or that loan officer will overlook these recent 30 day lates...or...Bank America has not asked me for proof of income these last few apps and this guy has undocumented side hustle income...or...this little community bank allows for short employment time...or...This lender always takes recent BK's as long as we have a discharge. They know what you have/are and should know how to slot you into the current lender pool for a good fit. If you have uglies... Just be forthcoming with them from the start, give them exact figures, and go armed with proof of residence, income (w2's, taxes, paystubs) all your id's and copies of anything bad that has not yet cleared on your bureau...if you have uglies. A buyer who comes prepared has a higher likihood of getting the finance manager of going into battle for them right then and there. When you will "bring them tomorrow, or cannot find, or cannot produce" you become too much hard work and not worth the time to push a hard deal through.

Second way, is to go to your credit union, have a sit down, ask them for their help and guidance in getting you bought. What can YOU Mr/Ms CU do for me? I'm looking at the new XYZ Car, I really like the model MSRP'd at $31.5. I have $5k down and would like to extend the loan for the max 84 months you offer. I figure that payment will be ~$600/mo and I feel comfortable with that. My current loan has 10 payments remaining but I'm quite comfortable with my current income to be able to carry that out for these last few months. Will you loan me on that new car without trading car #1. They may say No, we need car #1 paid, either trade it, sell it or wait 9 months. OR they may just say SURE! Because...credit unions love having all your business. If you default on that new vehicle, your credit card or your personal loan, they can attach all your other stuff. They can take your checking, savings, money market, or your other vehicles or house (any assets they finance or hold) to cover those defaulted debts. So that car with only $4000 remaining over 10 payments becomes collateral with a value exceeding the loan. But it is a good way to increase likelihood of getting a second auto loan.

If you are just a normal car buyer/owner, and do not want 2 cars, your current loan will go away with your trading it in and be replaced with a new loan on the new car. Adding this...do not take your car in to trade all dirty and nasty. It costs you money, you will get less trade in value. I always said "Oh no problem, we can see past a little dirt." But it was a lie. Dirty cars are devalued anywhere from $250-$1,000. Help yourself out and take a day to clean every nook and cranny. Make it shine like your 16 year old self did when you got your first car. It is literally money in your pocket.

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