Your Old Car Could Help You Get Another One

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Even with poor credit.

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Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - January 7, 2021

If you’ve got an older vehicle that you don’t want anymore and you’re itching for an upgrade, that car could help you get into another auto loan.

Trade-Ins and Your Next Auto Loan

If you’ve got an older vehicle that desperately needs an upgrade, you can use that clunker to lower the cost of your next car purchase. If you’ve got poor credit, trade-ins are even more of an advantage because they help you meet requirements necessary to qualify for an auto loan – we’re talking about the down payment requirement.

To meet a down payment requirement, you don’t have to bring just cash to the table, maybe even any money for that matter. Dealerships that work with bad credit borrowers, also called special finance dealers, accept trade-in equity to satisfy a down payment stipulation. Trade-ins are very common, and a great way to sell your vehicle with little to no effort on your part.

Once you locate a dealership you’d like to buy from, you can tell them you’ve got a trade-in. The dealer is the one that determines your car’s actual cash value. To see how much yours is worth, they commonly use vehicle valuation websites such as Kelley Blue Book or Black Book. The dealership typically takes it for a quick drive, looks everything over, and gives you an offer if they can.

If you accept the offer, you can use that amount to meet a down payment requirement of a lender and lower your next car’s selling price.

Do I Need a Down Payment?

Down payments are typically required if your credit is worse for wear. If your credit score is around 660 or lower, you’re likely considered a bad credit borrower. Since a lower credit score can mean more risk for an auto lender (meaning less of a chance of an approval for you), they generally require cash down to lower that risk.

Not only that, but down payments increase your chances of completing the loan. It’s been shown that borrowers that put cash down on their loans are less likely to default since they’re personally invested in the car and the loan is smaller.

As far as how much of a down payment you may need, expect a $1,000 minimum requirement, or 10% of the vehicle’s selling price. Sometimes, they accept whichever is less of those two, depending on the lender and your personal situation.

You can also use a combination of trade-in equity and cash. You’re only required to meet the minimum requirement, but you can go above and beyond if you wish. The less you need to finance as a bad credit borrower, generally the better, since you may be faced with a higher interest rate.

Larger down payments can save you lots of money in interest charges – auto loans almost always use a simple interest formula (your APR is applied to your loan balance daily). This also means that the shorter the loan term, the lower your interest rate; and the less you finance overall means more savings in terms of interest charges.

Determining Your Car’s Value

Before you head out to a dealership, you can look up your older car’s estimated value so you can have a rough idea of what your offer could be. You can use sites such as Kelley Blue Book, Black Book, or NADAguides. Simply enter your vehicle’s information, and you can get an estimated private-party value and trade-in offer.

Keep in mind that these valuations are just estimates, and your dealer determines the trade-in value. The make, model, mileage, age, overall desirability of your car, and more all make up how much your vehicle is worth.

Dealerships With Bad Credit Lenders

Once you have an estimated trade-in value, you can start calling around to dealerships in your area to see how much you could get for your car. However, not every dealer has bad credit lending resources. If you have poor credit, it may be difficult to find a dealership that can help – but we have an easier way to find ones that are signed up with bad credit lenders here at CarsDirect.

We’ve created a network of dealers that work with subprime lenders, and our connections cover the whole country. To get matched to a dealership in your local area hassle-free, fill out our free auto loan request form.

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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