Your car is worth $32,000. You owe $18,000. That leaves roughly $14,000 in positive equity sitting in the vehicle. If you're heading to a dealership for your next car, there's a good chance that equity will quickly become part of the conversation: “Great! We'll just put that toward your next vehicle.” But what if you don't want to?
Can you sell your car, pay off the existing loan and keep the remaining equity instead of rolling it into your next purchase? Yes. And depending on your financial plans, separating the sale of your
current vehicle from the purchase of the next one may be worth considering.
Your Equity Is Your Money
Positive equity simply means your vehicle is worth more than the amount required to pay off its loan. When the vehicle is sold and the lender's payoff is satisfied, the remaining value—after any applicable transaction costs—is yours.
That money doesn't automatically belong in your next vehicle. You might choose to use all of it as a down payment. You could use part of it and keep the rest. Or you may decide that money would be far more useful paying down debt, rebuilding savings, covering an upcoming expense or simply remaining in your bank account. The important thing is realizing you have a choice.
What Could $14,000 in Vehicle Equity Look Like?
Example |
Amount |
|---|---|
Vehicle selling price |
$32,000 |
Current loan payoff |
-$18,000 |
Potential equity before applicable costs |
$14,000 |
Automatically required as next down payment? |
No |
Your decision |
Keep it, use it or split it |
A Trade-In Can Make the Equity Easy to Overlook
When you trade a vehicle, its equity is typically incorporated into the new-car transaction. That can reduce the amount you're financing and potentially lower your monthly payment, which may be exactly what you want.
But it also means thousands of dollars of value from your old vehicle can disappear into a much larger transaction involving the new vehicle's price, financing, taxes, fees and monthly payment.
Before you know it, you're discussing whether you can get the payment under $600 instead of asking a more fundamental question:
What happened to my $14,000?
It wasn't lost. It was applied to the deal. But that doesn't mean applying all of it to another vehicle was necessarily your only option.
Selling Separately Gives You Another Choice
This is where selling your current vehicle separately can change the conversation. Instead of automatically transferring the value of one vehicle into another, you can determine what the current car is worth, satisfy its existing loan and see what equity remains. Then you can decide what makes the most sense for your money.
There are tradeoffs to consider. Using equity as a down payment can reduce the amount financed on the replacement vehicle and may improve the financing picture. Depending on where you live, trading a vehicle may also provide a sales-tax advantage. State tax rules vary, so that benefit should be included when comparing your options.
The goal isn't to prove that selling separately is always better. It's to make sure you're consciously deciding where your equity goes.
Before You Trade $10,000, $15,000 or $20,000 Away, Price the Car
If you're sitting on substantial positive equity, give CarBuyerUSA the opportunity to put a purchase price on your vehicle before automatically folding all that value into another car deal.
Our team can work with vehicles that still have existing financing, help determine the payoff information needed for the transaction and show you what a direct sale could look like. Once you know the numbers, you can compare selling against trading and decide where your equity works hardest for you.
Maybe you put it toward your next vehicle. Maybe you keep it. Maybe you do a little of both.
It's your equity. You should be the one deciding what happens to it. Go to CarBuyerUSA.com now and get your quote in 20 seconds and get ready to cash in!
Before automatically turning the value you've built in one car into the down payment on another, see what CarBuyerUSA will pay for the vehicle. Sell the car, satisfy the loan and find out how much of that equity could come back to you.
