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Step 1
The first way to trade in a car with negative equity is to pay a substantial down payment on the new car that you wish to purchase. This will eliminate some of the money that you owe on your current car loan. When you have negative equity in a vehicle, the car dealer will take whatever amount you owe, over what it is worth, and add that amount to your new car loan. The problem is, the bank will only loan a certain percentage of money on a car, it is called loan to value ratio. Usually with good credit, the bank will only lend 120% of the new car's actual value. If you have too much negative equity to roll over on a new loan, the bank will not approve the loan for the new car.
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Step 2
So if you are like most people these days and you are strapped for cash, and are having a hard time coming up with a few extra thousand dollars to put as a down payment on a new car you can do step 2 which is look for large factory rebates. These rebates from the car manufacturer's will reduce the negative equity in the car you are trading in and it will allow the bank to approve your loan, and it will get you out of what you are driving now.
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Step 3
Step 3 after you have chosen to put a down payment on a car, or take a factory rebate, now you must negotiate the best possible deal that you can get. The car salesmen are in this game to make money, the more they can get you to pay for a car, the more money they put in their pockets. Don't be afraid to ask for $500 more for your trade in, or $2000 off the purchase price of a new car. And don't forget, if the deal don't feel right to you, you can always walk away.
