@Anonymous wrote:
nothing is wrong with the current vehicle itself.just trying to get some more towing power, better MPG, longer lasting engine etc. (going from gas to diesel)
so in my understanding ill pay more $$ in the long run due to the negative equity that would roll into the 2nd loan. however could i battle that by paying more than the required payment each month? for example i currently pay 566 for truck 1. if the 2nd trucks payment came out to be 450 but i continued to pay 566 would that help? also would the negative equity of the 2nd truck matter as much if i plan to keep it for 10 plus years?
@Anonymous wrote:
You owe 25 K now - is there something wrong with the car ?
If you roll negative equity you may not get prime rates - but you would have to account for rates from what you have now to the new loan - you did not provide this information.
There are other factors - do you have a state tax on cars ? At a 6 % tax that adds 1200 to your debt. So with any reg fees ( assume 300) you are now in debt 27,500 on a car. The used car will lose about 5% (if from a dealer) once you drive it off the lot so you now have an 18,000 car and you are undewater 9500.00 - all in one day. Total bottom line you are going deeper in debt 3,500 + any difference in interest over the life of the loan vs the remaing interest on the old loan.
Is it worth it to you ? That is the real question .
Negative equity does matter because it means you will owe more than the car is worth for a long time. If something catastrophic happens to the vehicle and it's totaled, you could be on the line for several thousands of dollars more than the payoff was. This is why GAP insurance is necessary on most new vehicle (and sometimes used vehicle) purchase. You'll find that most lenders will require you to carry it, adding another $200-$800 (depending on where you get it) to the purchase price.
Even if your payments are lower (because your loan term is longer), you're going to end up paying more in the end. That negative equity you're rolling over will accrue interest over the entire term of the loan, turning that $6K chunk into almost $7,500 if you don't pay it off early.
I would advise making extra principal payments on your current vehicle, or even splitting your payments into weekly payments to allow less interest to accrue on the current loan. Both options can knock months off of your loan, but option 1 will do it a lot faster.
