If you bought your current vehicle from a buy here pay here (BHPH) dealership, you certainly can trade it in and use it toward a down payment. However, you need to make sure your car has equity or is paid off – most lenders aren’t going to allow you to trade in a vehicle that’s worth less than what you owe, which is known as negative equity.
Trading in a Buy Here Pay Here Car with Equity
In order to successfully trade in a car, you first need to clean it inside and out. This doesn’t mean it needs to be detailed, just make sure you wash it and vacuum and remove any stains.
Once you clean it, you should research your trade-in’s value to see how much it’s worth. Visit vehicle valuation sites such as NADAguides to get an estimate, and get it appraised by at least two dealers. From there, you can move forward in the trade in process.
In addition to cleaning it up, make sure all basic car maintenance is up to date and any minor repairs are fixed. Severe damage and major repairs shouldn’t be a concern of yours – the dealership can have a vehicle repaired at a much cheaper cost than you can, so don’t shell out hundreds or thousands to have this done.
One good tip we can provide is to bring in service records. They aren’t required, but it can be helpful if you can show the dealer that the car has been taken care of. It’s not a guarantee, but this could increase its value.
Getting Rid of Negative Equity
Let’s say you want to trade in that buy here pay here vehicle you bought, but you find out you owe more than your trade-in is worth. This means the car has negative equity. If you want to get rid of that negative equity, the best option is to wait until you have equity. Unfortunately, this just isn’t doable for everyone.
Some lenders allow you to roll over negative equity into a new loan, but we recommend you avoid this. The reason comes down to money: you essentially end up paying for two loans at the same time when you roll over negative equity. If you’re not financially prepared to handle this, then it could cause problems.
When rolling over negative equity isn’t an option, you have to pay off the difference between what you owe and the vehicle’s actual cash value. This is the only way to get the BHPH dealership off the title as the lienholder.
Of course, you could also try to sell your car yourself and get more money than a dealer would give you for a trade-in. This could allow you to cover the negative equity.
The Bottom Line
Make sure you have equity in your trade-in. It’s not the end of the world if you your loan isn’t paid off, just make sure you weigh all options and consider the best route to take. When you’re ready to trade in your vehicle, The Car Connection is here to help.
With our dedicated network of special finance dealerships, getting the lending you need for your next car can be easy. We'll work to match you with a dealer near you after you submit our secure auto loan request form.