Tips on Buying Cars: Advice, ford dealership, negative equity

Question
I purchased a 2003 Ford Ranger via a Ford Dealership about a year and a half ago. The mileage is around 49000. The loan is through a credit union in Chicago. My payments are $356 a month including the extended warranty they talked me into when buying. I am now having trouble making that large payment and want a smaller more fuel efficient car with a lower monthly payment. Can I go back to the dealership and make some kind of trade in switch to another vehicle, or is it all in the hands of the bank? I am new to the car buying world so I have no idea how this works. Thank you!

Answer
Ben,

You can trade at any dealership. The credit union only deals with the current loan. First you need to see what the value is for your truck. Go to kbb.com and get the trade-in value and the retail value for your truck. After you get both of those numbers you need to call your bank and get the 10 day payoff for the truck. Now we have some numbers to work with.

One of three things is going to happen 1-you owe more than the truck is worth. 2-you are at a break even point. 3- you owe less than the truck is worth. Here are the options below for each.

You owe more than it is worth.- This happens a lot. First options is to see if you can sell it on your own for what it is worth. Research what others are selling for in your area. If you can not you could sell it if you could pay the difference at the time it was sold. Next option would be trading it. To trade it and lower your payment you will need to roll as little negative equity as possible over. A very cheap new car (cobalt etc.) that has a good rebate will help eat the negative equity and you will be able to get a longer term therefore have a good shot at lowering your payments.

You are at the break even point.- Sell it on your own as you will get more money for it this way. You break out of it or maybe even make a few bucks and start fresh with the vehicle you go to purchase.

You owe less than what it is worth.-You want to sell it or trade it either way your in ok shape. Selling it on your own would of course get you more for it than a trade.


Now you can cancel your extended warranty and will be refunded a prorated amount based off the time and mileage left on it. My guess would be you owe more than it is worth and depending on how much can really change the rules. Let me know after you get your payoff and find the values where you stand and I will try to help more!

http://www.buyingacar101.com