QuestionWhat are your thoughts on trading in two cars on one new car? My autos are both upside total together about 10,000. Now i have been told that it can be done and have seen that i can save about 150 dollars a month by doing this.The only way was by having big rebates on the new auto.If you would give me your take on this.
AnswerThe current home-mortgage crisis has tightened all forms of credit, including auto loans. As a result, banks are much less likely to over-finance a vehicle because you're upside-down in your current cars. If they will do it, it will be because of an individual's stellar credit rating (a FICO score of at least 750). If you can find a bank that will finance under your conditions, there are two suggestions that you MUST follow:
1) Make sure the new loan has gap coverage. This will pay off the loan in full if your car is destroyed in an accident or is stolen and can't be recovered. Imagine having to replace the car because it has been totaled, then you have to come up with $10,000 in cash OUT OF YOUR OWN POCKET to pay off the loan. Gap coverage is an absolute must in your situation, and it's relatively cheap to buy.
2) Make sure you buy a vehicle that you'll be happy with, and can live with, for the entire term of your loan. Once you've traded in your current two and owe about twice what the new vehicle is worth, NO BANK will refinance you again if you try to trade. Well, no bank in their right mind, anyways. If you have to trade in a year or two because you're not happy with the vehicle, you're going to find it impossible. So don't settle: buy a car you like now, and will still like in six years.
