: Lenders often allow financing up to 120% to 130% of a new car's value to accommodate rolled-over debt.
: Dealers may use manufacturer rebates or discounts on the new car to offset some of the negative equity.
The phrase "we’ll pay off your car no matter how much you owe" is a common marketing slogan used by car dealerships. While it sounds like a way to wipe out your debt, it usually involves specific financial maneuvers rather than the dealership simply paying off your loan for free. How It Works
: The most common method is adding your existing debt to the loan for your new vehicle. For example, if you owe $20,000 on a car worth $15,000, the $5,000 difference is added to your new car loan.
When you owe more on a car than it is currently worth, you have , also known as being "upside down" or "underwater". Dealerships handle this in several ways:
