I really want to get out of my car. But the problem is, I owe too much
on it. I have a 2001 car. It's worth (Kelly Blue Book) about $6K. I
owe $9K on it.
Now here's the thing. I read on a few websites that I can use this
trade-in as a down payment for a car. I already have my sights on a
used vehicle (price is $9K at dealer. I havent haggled yet).
Can I use my trade-in (the 2001) as a down payment? What happens to me
being upside down in it? If I can do this, could you also give me
something to say to the dealer? I'm easily led astray.. if someone
says "No, you can't do this".. I sheepishly say "OK", especially when
I'm not sure if I can or not. I want to be firm and say "Yes, I can do
this. I know I can".
I don't have money for a down payment, which is why I want to use my
trade-in as down payment. My credit is good enough to get a car, I
never have a problem with that. The dealers just always give me a
hassle because of what I owe on my car. Plus, they never seem to want
to take my trade-in..
Any references would be nice, but I'm just really looking for an
answer. I don't understand any of this, unfortunately.

Hi,

You've asked a few questions so I'll try to break them down.

You say that,
"I have a 2001 car. It's worth (Kelly Blue Book) about $6K. I
owe $9K on it."

and you are upside-down on the car.

Edmunds has a great introduction to trading in your car. Part of the
article adresses your particular concern.

"If you are upside-down [owe more than the car is worth] as they call
it, don't worry. Most people who have a payoff are. If you can still
make the new car affordable, do it. If not, you can use cash to get
out, or keep the car a little longer."

Here's the article.
http://www.edmunds.com/advice/buying/articles/48934/article.html

If you are upside-down after only one year, it probably means you have
a long-term loan and are paying off interest rates more than
principle. The advice to keep your car a bit longer would mean you
would begin paying off more of the principle and closing the gap
between what the dealers say your car is worth and what you owe on it.
Adding an extra $25-$100/month for payments will help.

See "What to do if you are upside-down"
http://www.motorway.com/finance/articles/upsidedown.asp

You might also want to try the Smart Car Guide for selling your car.
It provides some tips on how dealers "value" trade-ins.
http://www.smartcarguide.com/disposing/Page1.htm

Also, double check the Edmund's Car Buying Guide for used car prices
to see how they value your car. I recommend Edmund's because they are
a reputable company.
http://www.edmunds.com/

You also say,
"I don't have money for a down payment, which is why I want to use my
trade-in as down payment."

If you really are upside-down, unfortunately there is no way you can
use your trade-in as a down payment. There's no capital to trade-in.

However, there may be some solutions to your problem. I recognize you
have your eyes set on a car already. However, the best thing to do in
your situation is to start from scratch.

If you have good credit, you could look at dealers around your area
that are offering cars with "no money down" deals. There are also the
idea of buying "new" again. During the summer, many dealers provide
"cash back" options that you might be able to use as your down
payment.

Finally, you also mention not knowing how to deal with the car
dealers. Rest assured, you are not alone. The majority of the car
buying public feels the same way.

Here's a very good reference for Dealing with Dealers
http://www.smartcarguide.com/dealers/Page1.htm

and some more very good consumer related references from the Federal
Consumer Information Center.
http://www.pueblo.gsa.gov/results.tpl?id1=9&startat=1&--woSECTIONSdatarq=9&--SECTIONSword=ww

Search Strategy:
consumer tips, cars
tips for trade-ins, cars
buying a used car

Awesome references, awesome comments. This helped me VERY much in
understanding what I should do. All of you put it into perspective for
me. Thanks pm3500, those articles were great!!! :)

I assume your car is purchased on hire purchase,
so technically the car belongs to the hire purchase company.
If you take out a personal loan to pay off the hire purchase company
the car will belong to you, enabling you to trade it in.
You can either extend this personal loan to cover the purchase of the
new car or take out a separate personal loan to finance it.

I see that there has been what appears to be a reasonably detailed
answer, but one item did not get mentioned explicitly which seemed
worth mention.

When you purchase the next car, get the best deal you can first, and
then tell them about the trade in and ask them how much they will give
you for it. They are not likely to make you an offer anywhere near
Kelley Blue Book, but at least you'll know.

Anyway, so now you've hammered out the best deal you can on the next
car.  Say you've got them down to $7,500.  And they now offer you
$5,000 on your old car, which leaves you with a shortfall of $4,000
(the $9,000 you owe, less the $5,000 they are willing to pay).

At this point, you _could_ get them to essentially wrap the shortfall
into what you will pay for the next vehicle.  So you'd offer to pay
them $11,500, and that is what they'd finance.

The other alternative is to sell the current vehicle directly, on your
own, to someone who can offer more than $5,000.    The problem with
that is that you will have to come up with the difference between what
they pay and what you already owe, and you'll have to pay that
difference to the loan company so that they will release title to you
and, thereby, to your buyer.

Big mess!

Either way, it seemed fair to point out that dealers _are_ willing to
let you pay a higher price for a vehicle than originally negotiated,
and to take that extra money and apply it to an outstanding loan on an
existing car to permit its payoff.

I've done that recently to good effect, though it was not a very large
shortfall (only $1,500).

Here is what I did, I was leasing a car, I had about a year left on
the lease, and I wanted to buy the car so I could sell it and buy a
new one. So to get the cash I needed to buy the car I got a home
equity line of credit (aka second mortgage). Then I bought the car,
which did a number of things for me: A) The title has no leins, so I
can do whatever I want with it, B) put my house in check for the car,
BUT a home equity loan/line is tax detuctable, and they usually have
very low interest (I got 6.5%). But now I can sell my car to whoever
wants it, and because the interest rate is so low, and the monthly
payment is so low, I am taking my time to sell it, and I am going to
get the price I am asking for it (or else I won't sell it, like your
car I assume, mine has no problem, I am just ready for a new one, so I
will just drive this one until someone buys it... )

p.s. Never lease a car! :)