Upside down... New Vs used

[RashShakur]

Hey Team Fico,

I am currently upside down on my vehicle by 7-10K .I am trying to determine the best course of action. Should I purchase a new vehicle with a relatively low interest rate or a used vehicles with a slightly higher interest rate. In your opinion which is the best option based on my circumstance.  My Experian credit score is 777 and my Transunion is 708. I cannot wait to Hear your opinion, and both are fico scores.My current interest Rate is 19%, and let me know why you chose new vs. used. 
 

New car purchase price 35-40k
Used car purchase price 25-35k

Thank you! 

[sccredit]

What is wrong with the current car?

[RashShakur]

The car is six years old, and the interest rate is 19%.

[Brian_Earl_Spilner]

It's difficult to recommend because we don't know what rates you would be approved for. Even if you got a good rate, all that negative equity is going to change it 

On average, every $10k you add to an auto loan will raise your monthly payment by $200.

On top of that, the amount of negative equity you're going to be rolling into the new loan is going to really screw the LTV, which will in turn change your approval odds and what rate you would get.

I would either pay down that negative equity or save up enough of a down payment to help offset it during purchase.

[RashShakur]

@Anonymous_Earl_Spilner Thank you for responding, and I have a lot to think about. 

[Anonymous]

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@RashShakur wrote:

The car is six years old, and the interest rate is 19%.

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A big reason you're upside down is you've been paying interest instead of principal, a situation you will endlessly repeat until you make improvement to your credit profile. 

Maybe post up in the Rebuilding Forum to see what can be done about that BEFORE looking to buy another car?

[RashShakur]

@Anonymous  Thank you and will do that and explore additional options. 

[Anonymous]

How long have you had the loan for your current vehicle?  
Does the new vehicle you're looking at have a large rebate?

Have you already applied for a new loan and been approved for a rate and amount?

Sorry for all the questions, but the answers will help me give advice from my perspective.  

[RashShakur]

@Anonymous  I have had the loan for 2.5 yem years, and the vehicle is Toyota 4Runner with a 2k rebate. I haven't applied for any loans thus far to gauge the interest rate without rolling the negative equity into the loan. 

[Anonymous]

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@RashShakur wrote:

@Anonymous  I have had the loan for 2.5 yem years, and the vehicle is Toyota 4Runner with a 2k rebate. I haven't applied for any loans thus far to gauge the interest rate without rolling the negative equity into the loan. 

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I don't think a vehicle with a 2K rebate will be enough to get your negative equity rolled into the loan.  It could work if you have some money to put down.  
I completely understand wanting to get out of the loan you have now with that rate.  I would either try to find a new vehicle with a larger rebate or refinance your current loan.  Good luck to you.