Trading in a Car with Bad Credit

Get Car Financing
Even with poor credit.

By

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - November 30, 2017

For car buyers with bad credit, one of the smartest moves they can make is to trade in their current car when taking out a new loan. Bad credit won’t affect the trade-in process – but having negative equity will.

Trade-In Value and Bad Credit

Instead of worrying about just their credit, car buyers should concern themselves with the value of their trade-in as well. These factors influence what consumers can get for their trade-in:

  • Age and mileage
  • Condition
  • Trim level and optional equipment
  • The vehicle’s popularity
  • Market conditions

Car buyers can apply the value of their trade-in as a down payment on their new loan. Customers with bad credit almost always need a down payment, so trading in their car can help them get approved. If the trade-in isn’t enough to cover the down payment, buyers can combine the value with their own money to meet the requirement.

However, if the trade’s value is less than what a bad credit buyer owes on their loan, the difference – known as negative equity – can complicate the process.

Trading in a Vehicle with Negative Equity

Shoppers need to be aware of what they owe on their car compared to its trade value because lenders usually don’t allow bad credit buyers to trade in a car with negative equity (unless they have the cash to cover the difference).

A word to the wise: don’t roll negative equity into a new car loan in the rare occasion a lender allows it. Rolling over the balance inflates the new loan and results in additional interest charges – an expensive practice considering the high interest rates bad credit buyers face.

Finding a Bad Credit Auto Loan

Bad credit doesn’t complicate the trade-in process – although having negative equity can – but it may make getting approved for a car loan challenging.

If you find that you need an auto loan but struggle with credit, CarsDirect may be able to help. We work with one of the nation’s largest networks of special finance dealerships who know how to assist people in many types of credit situations. Fill out our free online auto loan request form and we’ll work to connect you with a dealer in your area.

Free Credit Score

Get your free credit score now! Get a copy of your most recent credit score.

Get Your Free Score

Auto Insurance

Get competitive quotes on insurance in your area.

Sell Your Car

We will buy any car, running or not, with or (in most cases) without the title.

Get My Price

Need a Car Loan?

It only takes a minute.

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.

Privacy Policy|Terms of Use|Cookie Policy|Disclaimer
COPYRIGHT 1999-2019 MH Sub I, LLC dba CarsDirect.com