Trade-in equity can help you meet or exceed a down payment requirement, which is often part of financing a vehicle when your credit score is less than stellar. Right now, used car values ââare high, so maybe it’s time to turn your vehicle into a decent down payment.
Exchanges and deposits: a divine match
One of the most common questions we ask ourselves about bad credit auto loans is, “How much down payment do I need?” “
Consumers are correct in assuming that they will need a down payment for a loan. Almost all bad credit lenders require a down payment when your credit score is not ideal. Most subprime (or bad credit) lenders charge at least $ 1,000 or 10% of the vehicle’s sale price.
However, you do not need to meet this requirement in cash only, as trade-in equity can also be used to meet this requirement.
When you trade in a vehicle, you can choose to pocket the proceeds or use it toward the sale price of your next car. If you still have a loan at the trade-in, any money left over after the repayment (equity) can be used towards your next vehicle purchase.
To see what your car may be worth, visit some valuation sites such as Black Book, Kelley Blue Book, or NADAguides. Although the values ââoffered by these sites are only estimates, they can give you an idea of ââwhat a dealer might pay for your vehicle. Then you can take that amount and apply it to the down payment requirement on your next car loan.
Trade values ââhit record highs
If you’ve got a car you can’t wait to trade in for an upgrade, this might be the time. As the fleet of new cars is insufficient, second-hand vehicles are in great demand.
It’s no secret that the pandemic has ruined some things in terms of production. There is a real Ongoing global chip shortage (unlike the infamous toilet paper shortage), which is slowing the production of new cars and other electronics.
Autoweek pointed out that other factors contributing to the rise in prices of new and used cars are lack of repossessions and rental companies that don’t sell their rentals because they can’t buy new inventory.
This is great news for sellers, and for you if you are looking to trade in your old vehicle for something else. Dealerships need inventory, and if you have a decent used car, this could be your ticket to qualifying for a bad credit auto loan (provided you meet the other requirements of a subprime lender!) .
Preparation for the exchange
Before deciding where to trade in your vehicle, call for several offers. We recommend that you call or visit at least three dealerships and make it a point to get an estimate from a franchise dealership for the make of your vehicle, as they may be willing to bid higher for your car.
Here are some more tips to increase the value of your trade-in:
- Make some light repairs – This may include replacing brake pads, polishing small scratches, removing stains from the interior, and ensuring proper tire pressure. These are inexpensive little things you can do to give a dealership a good impression of your vehicle and possibly get a higher deal.
- Bring your service records – If you have regularly serviced your car with oil changes and required maintenance, presenting these records could give you an advantage in negotiating your trade-in offer.
- Come prepared with values – If you have no idea what your vehicle’s purpose in today’s market is, you are not ahead of the game with a dealership during negotiations. Bring trade-in values ââto the table to increase your chances of getting a fair deal.
If dealers are interested in purchasing your vehicle, now is the time to decide which one you want to work with. However, if your credit is low, you may need to go to a special financial dealer who has signed up with subprime lenders. These lenders often work with borrowers who have credit problems, such as bankruptcy, no credit, and bad credit.
Make a move!
When you need a car loan and have a trade for equity, you are in a good position. Putting money aside on your next vehicle can increase your chances of getting approved, lower your interest costs, and charge you a lower monthly payment. Whether you meet your cash down payment or trade-in capital requirement, it’s neither here nor there – both can do the job.
If you need a dealer relationship as a borrower with bad credit, consult us at Auto Express Credit. Over the past two decades, we’ve built a network of dealers from coast to coast who are registered with subprime lenders. Be matched with a dealership in your area after completing our free auto loan application form. There are never any fees or obligations, so start your journey to a car loan with us today!