how to sell an upside down car

How to Sell an Upside Down Car {Dealing With Negative Equity}

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Today we’re talking all about negative equity and how to sell an upside down car. You probably found this post by searching for ways to cover the negative equity in your car.  As a self-diagnosed free-spirited nerd, I have had a bad habit of trading in cars with negative equity for an “upgrade”. What’s the definition of insanity? Doing the same thing over and over expecting a different result? Yeah, that’s been me. I’m sure many of you can relate.

Related Posts About Making Money to Help Pay the Negative Equity to Sell an Upside Down Car

Our Latest Upside Down Car Trade-In

My husband and I purchased a brand new vehicle years ago and decided awhile later, that, after financing $48,000 and $733 minimum monthly payment, we were done. We were done basically paying the equivalent of a house payment for a car.  We already knew our credit scores, so we walked into our credit union. We sat down with our banker, and we explained our situation. I asked them, “Will you please pull the NADA value of my vehicle?” Being a former banker, I know that NADA is how the banks and credit unions determine how much money to loan on vehicles. They actually don’t even use Kelley Blue Book. KBB is garbage, in my opinion. It’s not an accurate valuation of a vehicle. If banks and credit unions are using KBB, then…I’ve worked at a few different banks, and none of them use KBB. So if they used it, I might feel differently about it. Car dealers tend to use KBB to their advantage when they’re offering trade values for your vehicle. So let’s say you walk into your bank. You talk to your banker. You say, “Ok…I’m upside down $5000.”

If your local bank won’t work with you, try Lending Tree. Their rates are low, depending on credit, but you can click here to see if they’re a valid option. Just don’t have the dealership run your credit. You lose all the power when they know your entire financial situation.

Now you know the value of your vehicle, and you’re upside down $5000. If you’ve been looking at vehicles, and you have an idea of what you’re looking for, talk to them about it at that time. Say you found a 2009 Buick Enclave, and it’s $12,000, and it has 90,000 miles. They can plug that into NADA Retail or NADAguides.com and give you a retail value on that as well. And sometimes the bank or credit union will loan 125% of the retail value. So that’s good to know going forward because if you are upside down, sometimes you can get a little bit of that negative equity squeezed in there. But I would always recommend gap insurance in that instance…always.

Your insurance company likely offers gap insurance for significantly cheaper than the car dealer. Do not purchase gap insurance from the car dealership. Purchase gap insurance through your insurance company. And you will save hundreds of dollars.

 

How to Sell an Upside Down Car When You Have Negative Equity

You need to know your credit score before you get started. You can find out your FICO score here. So you’ll talk to your bank to weigh some options. The next place that I would go after having talked to your bank, when you have an idea of how much money you’re gonna have to come out of pocket, is to Carmax. They’ll give me a valuation offer for it. So Carmax will offer to purchase your vehicle at a set amount. It’s no b.s. It’s no-haggle. It takes about 45 minutes for them to value your car, and you can leave there with a sheet of paper that says they will buy your car for X amount of dollars within 7 days.

So you want to make sure you’re at the end of your decision-making process before you do that. But take that piece of paper…fold it up, put it in your purse, and now you’re gonna drive to the car dealership where you were looking at a vehicle. And you want to not give away too much information about what you are looking to do.

How to Deal with Car Salesmen when Selling an Upside Down Car

How to Sell an Upside Down Car

Walk in there and ask to test drive a specific vehicle. They will ask you if you have a car to trade. Don’t tell them that you have a trade yet. Don’t lie to them, but say, “You know? I’m not sure what we’re going to do yet.” So go in, test drive the vehicle. See how you like it. And make sure you’ve got your pre-approval from your bank as well. Knowing your credit score will help you get the best rate. Then you can sit down with them and explain to them that you want to negotiate a price for that vehicle. Try to negotiate a price for the purchase of the vehicle without your trade included at first.

Car dealers will hate on me for this, but that’s what we have to do. We have to protect ourselves as consumers. So see if they’ll negotiate a price for you and then if they are really persistent about if you are going to be trading your vehicle or if you feel weird about not telling them then just let them know. Also, let them know that you did get a valuation at CarMax, but you’re waiting to see what their offer is going to be. Don’t share the offer from Carmax just yet. You’re going to get an offer. They’ll write down some numbers, and they’ll want you to sign something committing to purchasing the vehicle. They might ask you to initial the paper.

Don’t do that. Ask if you can test drive the vehicle overnight while you think about it. Take the car and go to a competing dealership with the car. With the other dealership’s vehicle, and tell them that you’re looking at this car, but do they have anything similar? And sit down and do the exact same process with that other dealer. If you have to do this at several different dealers that day, do it and then take the car back and go back and forth between the dealers. I know it sounds like a lot of work, but I can promise you that you will get a better deal.

[clickToTweet tweet=”Car Salesmen will compete for your business IF they’re good at their job. #howtonegotiate #upsidedowncar” quote=”Car Salesmen will compete for your business if they’re good at their job.” theme=”style2″]

More Money for Your Trade

I actually was able to get $500 more than what Carmax had offered me, but, strangely enough, the Honda dealership that I purchased my vehicle from (brand new) was offering me $2000 less than Carmax, and they said, “Oh! We want your vehicle!” Because we bought it brand new at that dealership. It was 2 years old. And it had been serviced faithfully, so they could put it as a certified pre-owned vehicle on their lot for about $4000 or $5000 more than what they were offering me. So I walked away from that dealership. We’ll never do business with them again.

I hope that these tips have helped you a little bit to understand how to sell an upside down car. Obviously, you’ll need some cash. I would never recommend using credit cards to offset negative equity…not even the 0% credit cards because …it’s just not a good idea. You can tell yourself that you’ll pay off the balance within the promotional period, but it’s just too risky. Unsecured loans are really hard to get unless you have A+ credit, and the interest rate is usually very high on these types of loans due to risk.

The Best Budget “Dave Cars” with 3rd Row Seating

If you’re thinking of selling an upside down car but are worried about finding a reliable vehicle big enough for your family’s needs, here is a list of options with third-row seating for larger families. You can also search for AWD options if you live in snowy areas.

  • Buick Enclave
  • Chevrolet Traverse
  • Dodge Durango
  • Ford Explorer
  • Mazda CX9
  • Toyota Highlander

These are all midsize SUV’s with third-row seating available. We owned a Buick Enclave and loved it! It was a 2009, and with leather, heated seats, a backup camera, Sirius XM radio, and AWD, it met my family’s needs at a price of just $10,000. If you can find a good, used vehicle with a lifetime warranty at a dealership (at no additional cost), this is the route you want to go for your “Dave” car.

So to recap: talk to your bank about your options. Go to a Carmax. Get your valuation. Use your valuation as leverage, and just keep that nugget of knowledge for you as fuel with the other dealers so that you can get the best deal when you’re trading out of a more expensive vehicle.  Please take a moment to subscribe to my YouTube channel. Let me know if you have questions or comments! I hope this helps you understand a bit more about how to sell an upside down car!

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Melissa

I've done all the things! Girl, I've washed my face. I've trashed everything that doesn't spark joy. I've walked the baby steps. I've cried. I've prayed, but my perfectionism has really held me back.

Perfection Hangover can be crippling. Stop comparing yourself to others and start living your best life! That's why PH exists! I want to encourage you to take control of your money, your blog, and your business.
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Comments

  1. I used to work in insurance so I know about these kinds of cars. Most people fixed them a bit before selling

    1. Haha…maybe I should clarify these cars aren’t literally upside down from being in a rollover accident 😛 The owners owe more than what the car is worth 🙂

  2. Lynne

    Helpful information! When we were in our 20s, we made some silly car purchases and ended up “upside down” once. It’s something that only has to happen once for it to never happen again!! Thanks for these useful tips!!

    1. Yes, Lynne! It is a very frustrating situation to owe more than the car is worth! Glad you learned from that as well! Thank you for your comment!

  3. I’ve also made this mistake once so now I save up and buy an older car in cash to avoid having car finance.

    1. So smart, Naomi! By not having a car payment, you’re freeing up so much money every year for other things…whether that’s saving, investing in your business, or being able to take a vacation with the family!

  4. Shaily

    I didn’t know about all these options to sell a negative equity. It’s quite a frustrating situation. I loved reading through your post especially trading with the dealers and test drive options. I agree it’s a bad idea to offset a negative equity with credit cards or high interest loans. Thanks for sharing these helpful tips.

    1. Thanks, Christina! If people don’t put down a good amount of money (or pay cash in full) for a car, they start out upside down. I am just hoping to help those who are stuck with negative equity find a way out. 🙂

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