Tips on Buying Cars: Want to sell car with loan, buy cheaper one, credit unions, payment history

Question
Hello Jeff,
I want to sell my 2004 sunfire and purchase an older car that I absolutely love! The problem is I owe a little less than what it's worth, and was wondering if you have any tips on how to sell a car with a loan? Also, how can I finance the new car? Would it be worth while to contact my current lender and see if they will finance the new, lower loan even though i don't have perfect payment history? I only have one or two late payments (over 30 days) in the last 3.5 years.
I currently owe $7,000, and the new loan would be about $4,000.
Thanks!

Answer
I apologize for taking so long to answer- it's ben a rough week personally and haven't been near a computer.  Now, to your questions:
1) The "problem" is that you owe less than your current car is worth?  Did you mean to say that you owe "more" than it's worth?  Owing less is not a problem- that's a good thing!  If you do owe more than it's worth and you sell it yourself, then you'd have to come up with the difference in cash to pay off the bank, before you can transfer ownership.

2) You should certainly contact your current bank to see what they can do, but I have a feeling you'll need to shop banks and credit unions.  Since most banks can't appraise every vehicle they finance, they usually charge higher rates and go shorter terms for older vehicles, regardless of condition.  A solid credit history will help you get around that with a bank you've established a good reputation with, but only to a certain degree.  For example: I could get a 5-year loan on a used 2006 for around 7 percent with no problem, but a 1999 would be in the 10-12 percent range, and certainly for no longer than two years.  If they did give me a longer-term loan on that '99, then the interest rate would go through the roof.  So, as I said, you really need to shop for a good term AND a good rate on an older vehicle you wish to finance.