I owe more on my current loan than my current vehicle is worth. What do I need to know if I buy a new vehicle?

To find out if you have negative equity, you should look up the approximate value of your current vehicle using websites such as the Consumer Reports, Edmunds, Kelley Blue Book, NADA Guides, and online classifieds. You may also find these and other resources at your local library. Look up the “private sale” value, because that’s what you can get if you sell your vehicle to an individual. Look up “Trade In to Dealer” if you want to see a range of prices for similar vehicles. Then call your lender to find out how much you still owe on your loan.

A dealer may offer to “roll in” the balance of your old loan into a loan for a new vehicle. This is called a “negative trade-in,” because the trade-in adds to the cost of the new loan, rather than reducing it. This might make the new loan unaffordable. Be very careful to make sure you understand the total cost of the new loan and the monthly payments – and the loan term (in months) – before you agree to anything.