Getting into a new used car isn't always easy. When you have an existing auto loan on a car that's recently broken down and needs more repairs than it's worth, what are your options? Here, you'll find a few tips to help you get into a new car while stuck with the other.
Get Pre-Approved for Auto Loans
Before you get yourself in a panic, the first thing to do is to get pre-approved for an auto loan. Pre-approval helps expedite the buying process because you'll know exactly what you can afford and how much you have to work with to get into a new used car.
You will submit an application with honest answers about income, employment, and debts owed. The lender will look into your credit history, take into account your debt-to-income ratio, and submit a loan offer to you.
Consider a Trade
You may be able to use your broken down car as a trade, but to do so you'll have to pay off the existing loan to get the title. If you can find a good enough deal on a new used car, you may be able to finance the payoff as well as the cost of buying the new car on one loan. The key to this working is the car that you're buying must be priced low enough below Blue Book value to allow for the addition of the payoff amount to not bring the total cost above Blue Book value.
In other words, if you find a car worth $8,000 that's listed for $6,000 and you owe $2,000 on your existing loan, you may be able to get a single auto loan to cover the cost of both.
Take a Personal Loan
Another option to get the title for the broken-down car is to take out a personal loan to cover the balance. Then, when the auto loan is paid off, the lender will release the title and you are free to sell it outright, take it to the salvage yard, or whatever else you choose to do with it. The good news is, once you remove the lien on the car, you can drop or reduce the auto insurance coverage. This will save you quite a bit over the course of a year.
Take your time as you make the next move. It's hard to be patient when you need wheels, but making a mistake now could make it harder to recover later.