If I Owe Money on My Car Can I Buy a New One?


Buying a new car while you owe money on another loan is a possibility, although not everyone can have two loans at once because of income or credit issues. You can also trade your vehicle toward a new purchase; the dealer will pay off your old loan.

Before pursuing either option, budget accordingly or consider trading or selling your car instead.

My Car Can I Buy a New One


Bank Determining Factors

When you apply for a second car loan, a bank uses your current income as a determining factor. The bank accesses your credit history to view your debt. On your credit application, expect to provide the name, phone number and address of your current employer.

Expect to also supply a copy of your most recent paystub, which the bank uses to determine your annual income.

If you have a positive payment history with creditors, a stable job and decent income, a second loan is likely.



Even if you do obtain an approval for a second car loan, you should carefully review your budget to determine the true costs of a second car and if it is affordable. Most lenders require a full coverage insurance policy on its vehicle (the most expensive you can purchase), so your insurance cost will likely double.

You’ll also have to maintain two cars, so check with a dealership or service shop to find out about recommended service schedules and cost.


Trade-in Option

Even though you still owe money on your current vehicle, you can use it as a trade toward another purchase. In the event you trade your vehicle, the dealer will pay off the vehicle’s loan balance.

If you were unable to obtain an approval for a second loan, a bank might allow you to take out a new car loan if you end your current one. You can transfer any excess loan amount, or negative equity, into your new loan or use the trade’s equity as a down payment.


Sell Your Current Vehicle

If you couldn’t obtain a second loan because of your income but don’t want to trade your car, consider selling it on your own for more profit. Dealers offer wholesale value for trade vehicles, which is the lowest when compared to other options.

Private sale values, which you can gauge at or the Kelley Blue Book website, are thousands higher than wholesale value. Even with a loan, you can use your sale amount to pay off the loan balance.

However, you must come up with the loan’s balance if you can’t sell your car for the loan’s total payoff.


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