If you still owe more on your loan than your car is worth, you are upside down.
You may still be able to buy another car if you are upside down on your previous loan.
There are two ways to go about it.
One way to buy with an upside down loan
You could sell your old car but you will have to add extra cash to fully pay off your old loan. You’ll need to pay off your loan so that you can give a clear title to your buyer. However, coming up with extra cash might be a problem, especially if you are upside down by a large amount. For many people, this solution is not possible.
Let’s look at some other ways.
Another way to buy if you are upside down
You can trade your old car at a dealer and let the dealer pay off the old loan. Sounds easy, but there’s a catch. If your old car is not worth as much as the amount remaining on your old loan, the dealer takes the difference and adds it to the price of your new car. If you are upside down by a large amount, this can significantly raise the cost of your new car. In some cases, a dealer will not allow the entire amount to be rolled into a new loan, which means you must come up with some cash as a down payment.
When you roll part of an old loan into a new loan, it usually puts you right back into an upside down situation, which is usually worse than your old situation. It is a vicious cycle that you would be best to avoid.
The best way to get out of an upside down loan is to simply keep your old car, keep making payments, until you are no longer upside down. Then, you have the option to do anything you want.