@CH-7-Mission-Accomplished wrote:
I am ignorant about auto values. How does NADA values compare with Kelly Blue Book? Is NADA the one most lenders use? Also these days are you usually permitted to finance like 110% or 125% of the value or is it like 80%, 90% or 100%?
I hear a lot about auto dealers rolling negative equity into new loans but I don't understand how it works.
When I bought my last car I had to put down 10% or something. It was a Cap 1 blank check loan (pre-BK7 a few years).
The NADA book is what's used by the vast majority of lenders bad typically has values lower than Kelly Blue Book which is not used that much in the auto financing world. In 17 years in the auto business I never saw one at all. Another book that is used the Black Book which most dealers use to determine trade in value. The values in the Black Book are based on what similar vehicles are selling for at wholesale auctions.
Rolling in negative equity is very simple. Let's assume you owe $14,000 and the trade in value is $12,000. That means you have negative equity of $2,000. You are about to purchase a new car that has a MSRP of $25,000 and thru negotiations you have brought the price down to $21,000. The dealer will then roll in your negative equity and your effective price for the new car is $23,000. That way you're still below the value of what the financing company will approve. The percentage of LTV varies depending on new vs used and what finance company is being used and your overall credit.
Hope this helps.
