This story was provided to The Associated Press by the automotive website Edmunds. Check manufacturers’ websites for advertised rates and use a loan calculator to check if the terms will be favorable enough to make the switch. Using our $35K vehicle as an example, your monthly payments would be lower, but the loan would cost about $3,200 more in the long run.ĮDMUNDS SAYS: Even if you don’t qualify for a 0% loan, there still may be lower finance rates available. Let’s say your negative equity is closer to $10,000. #Edmunds loan calc full#And even though the loan term is longer, you’ll be in a better position to trade your vehicle in before the full loan term if your situation demands it.įinally, we should note that this strategy isn’t a silver bullet for everyone’s situation. That means your money goes directly to building equity, and you can expect to have positive equity in your vehicle roughly halfway through the loan. With a 0% loan, every payment you make goes entirely toward reducing the principal rather than paying down the interest. #Edmunds loan calc plus#The total saved here isn’t impressive at a glance, but your monthly payment will be about $104 less per month with the new loan.Īmount financed: $40,000 ($34,500 vehicle price, plus $5,500 negative equity) You can still take advantage of the deals, up to a point. Let’s say you couldn’t resist the urge to upgrade, or perhaps the negative equity pushed your new loan higher than the old one. The 0% loan will save you about $163 per month and more than $6,000 in finance charges.Īmount financed: $35,000 ($29,500 vehicle price, plus $5,500 negative equity) Not only will you save on the finance charges, but you’ll also have a lower monthly payment. If your choice in the new vehicle, or negative equity from your current one, resulted in financing about the same amount as before, you’ll still come out ahead. New amount financed: $30,000 ($24,500 vehicle price, plus $5,500 negative equity) This move will save you about $223 a month and more than $11,000 in finance charges. As a result, you are financing about $5,000 less than your prior loan. Perhaps you had a midsize SUV and realized that a small SUV will not only get the job done but also cost less. Note that the figures below will vary based on how much negative equity you might have. We’ll also factor in about $5,500 in negative equity that will be carried over into the new loan. This person will then move on to an 84-month, 0% loan in the following examples. Our baseline, using average loan figures, will be a person currently paying for a 72-month loan with a 6% APR on a $35,000 vehicle. Here are a few scenarios to illustrate the options people have and how they could come out on top. It’s an opportunity to get out of a high-interest loan on an upside-down car without absorbing a large financial hit up front. If you have a good credit rating and can secure low- or no-interest financing on a new loan, rolling over your negative equity - up to a certain point - may allow you to reduce your monthly payments and save money on finance charges. Edmunds’ experts usually advise against trading in a car that you owe money on, but we’re living in unusual times and the current financial landscape presents a unique opportunity.
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