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Posted in Auto Loans
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jaiderael

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Needing a new vehicle. Will it hurt to trade in my car when I still owe on it?
I owe $9700 on my car but want/need an SUV but it costs $51,000. Will this hurt or help my wallet and score?

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I will bet you will go under water with this.  Look up the KBB value for your car now; if it is even close to what you owe the dealership will give you less. This means that you will be taking a loan out for the new car that is more than the new car is worth. This is not even including the 20 precent value loss you have for driving the new car off the lot and it becoming a used car.  Therefore, the main question is ... How much have you saved to put down with the trade in.  it is horrible for anyone to owe more than they can get out of a car, and you should always plan on having 20percent down so that you are least not at risk of driving the car off the lot, getting into an accident, totaling new car, and insurance not even covering it. Leaving you with thousands of dollars to pay on a car you do not even have anymore.  This is why there is GAP insurance, but why pay for that when you can save and not have an issue? In so far as your score.  Your credit score will drop some due to two reasons for sure and possibly a third. 1 average age of open credit will be lower 2 Hard inquiries 3 may affect your total credit utilization (right now you have 9.7k of whatever the car cost, utilized the new loan will be 100& utilized)  So if you are going to be needing a high credit score in the near future, this does have an effect. The effect will diminish in a year or so.

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Sounds like a very expensive WANT instead of a need.  Keep the vehicle you have now, build your credit, save some money and then consider getting a new vehicle. You'll appreciate it more. I do.

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