What Is My Car Worth?

How do you trade in a car that you owe more on than what it's worth?

• I recently (back in June 2011) bought a 2000 Honda civic from a hole in the wall buy here pay here car dealership. At the time I absolutely needed a car because some drunk guys stole my car and wrecked it. I had no credit so I felt this was the only option that I had at the time. Since then, I've gotten a much better job and would really like to buy a newer car. Nothing totally new, but at least like a 2008. But I'm in a bind because I owe well over what my car is actually worth. I still owe about $6,000 and the car according to Kelley Blue Book is only worth about $2,000. I am paying directly to a dealership and not through a loan, so I was thinking if I'm going to pay this much for this car anyway why not just add it on to the total amount of a new car but I've been reading up on this and it kind of seems like a bad idea. Any suggestions? I really don't mind paying the extra on the total amount for the new car. The way I see it, I'd be paying it anyway. But I don't know how much you have to have paid down on your car for you to even be able to do that? Please help! Thanks!

• Answer:

  The problem is, you have $4000 of negative equity. That amount has to come from somewhere. Let's say you want to buy a car for $10000. Because of the negative equity, you would need to borrow $14000 to purchase a $10,000 car. No lender is going to approve a loan for 40% more than the car you're buying is worth. This was a simplified example, but that's why your idea won't work. In your case, the $4000 would have to come out of your own pocket.