Quote:
Originally Posted by MisterSkiMask
The car is cash. When you trade in all you are doing is selling the car to the dealership. In the above scenario you could do the following:
The value is $28,000, you owe $14,000, you can have them write a check to you for $10,000 and put $4,000 toward your new purchase. Or any combination you would like.
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Yah pretty much right, oweing more for your car than you owe is considered inequity. You can pay it off or like most people, just roll it into your next loan. In the above example you would add 14000 to whatever the purchase price was on the next vehicle and loan this total figure. (30,000 purchase price + 14,000 inequity= 44,000 total financed)
Since most people are most concerned with getting the lowest payment, the payment is stretched out to as long as they can get. (sometimes up to 8 years!) This factored in with interest means that the car will most likely always depreciate faster than you pay it off, hence the inequity. The sad thing is many people will do this multiple times because "they got to have it" and will become "buried" in each and every car. I have seen this multiple times, if someone is going to buy cars this way, I would recommend that they at least buy used cars because then at least they can avoid the initial and substantial "hit" on buying a new one....
Hope this helps clear any questions up you have.