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Should I Roll My Old Car Loan Into My New One?


Vintage car on road
Andre Delhaye/ Moment/ Getty Images

If your car begins to break down or if you need a new car because you have growing family or if you need to change from an SUV to a commuter car, you may be wondering how to deal with your existing car loan and your current car. It is common for people to trade in the car at the lot and to roll the old loan into the new loan. You should carefully consider your options before you choose to do this.

It is important to remember that a car salesman’s job is to talk you into buying the car on the lot. When you remember that it will help you realize that every deal they offer you may not be quite the deal that you think you are getting. If you already owe more than your current car is worth you will compound the problem if you trade in your current car and roll the loan into your new one. Before you start shopping for a car your should determine if you want a new or a used one.

You can often get more money for your car if you do a private sale. This is not a complicated process, and you can use the money to pay off your current loan. If you still owe money on the car loan, you will need to contact your bank and work out a way to transfer the loan into an individual loan or come up with the money to pay the difference. Then once you sell the car, you will transfer the title over to the new owner.

The best option when you need to purchase a car is to pay entirely in cash. However, that may not always be possible. When you decide to buy a new car, you need to make sure that you can afford the payments. One of the most common complaints about buying a car is that they paid too much and the payments are causing them to struggle financially. You should determine how much you can afford to pay each month, keeping it so your total debt load (including your rent and house payment) is below thirty percent of your monthly income. Ideally you should be able to pay off your car in three years on that current payment.

Additionally you may be better off if you find your own financing for the car, rather than use the dealer financing. You may be able to find a better interest rate, particularly if you are buying a used car. Credit unions and small banks offer the best interest rates on car loans. You can contact the credit union to get preapproved before you begin car shopping. This will let you know what your price range should be.

Make sure you negotiate the price with the car dealer before you buy the car. The prices are negotiable, and you may be able to negotiate the down payment amount and other terms. Some car companies will offer you a lower interest rate if you buy a new car, and you may think this is the best option, because you will save interest on the loan amount. However, a car takes the biggest depreciation in value the first three years of its life. You may end up losing as much in resale value as you would save in interest when buying a used car.

Another important factor to consider is to make sure that you do not get caught up in the moment when purchasing a car. Research the cars at home, and then go to the lot. Take a day or two after your test drive to make your final decision. Finally make sure that you really can afford the payment you are making. You do not want to end up regretting the purchase for a long time. Try saving up cash to pay for your next car.

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