Deciding What You Want

Getting A New Used Car When Your Old One Dies With A Balance Due

13 September 2019 by Alex Hale

For a lot of people, owning a car isn't a luxury — it's a must. Living in tranquil rural areas may be great in a lot of ways, but when it comes to public transportation, things are quite lacking — and so, residents must have cars to get around. If you're one of the many that can't get around without a car and you've found yourself stuck with a broken or wrecked car that you still owe on, you're going to have some difficult decisions to make in the days ahead. Here, you'll find some tips to help you get into a new used car while a bank has a lien on the old one.

Discuss Trade-In Options

You probably won't like the numbers that you're given when you request a trade-in quote, but, at this point, anything might be better than nothing. Chances are, they'll offer you something like $500 if your car is in need of extensive repairs. This really only becomes beneficial when the dealership works on the loan paperwork with you. If you manage to find a used car that's worth quite a bit more than it's selling for, you may be able to take out a new car loan to cover the payoff of the old one and purchase the new one.

Keep Both Loans

Another option that you might have is to find a cheaper used car and take out a second auto loan to purchase it. This way, you don't have the balance of two cars on a single loan — this will make payments very high and start you off with a balance that is likely as much or greater than the value of the one car that you will have running. This can cause serious problems if you don't purchase Gap insurance through the lender when you buy the car.

Gap insurance is the insurance that covers the difference between what's owed on the car and what the car is actually worth. You see, if you crash a car and you owe $5000 on it, but it's valued at only $2500, your auto insurance will pay the $2500 and you'll be left to pay the balance — Gap insurance covers that balance.

Talk with the salespeople at the auto dealership. They've helped many people through similar situations and will provide you with the greatest insight on what the best next move for you will be. 

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