There are times in almost every person’s life when they want something that looks a little out of reach. This can be very true when it comes to cars and car loans. There are many reasons people need to sell their cars before they are completely paid off.
What happens if your circumstances change before you pay off your car? Let’s say you bought that 2 seaters you’ve always wanted and 2 years down the track you have a family and need a baby seat, what then? You know that when you go to sell your car in Dubai, you are going to owe more than the car itself is worth, so what do you do?
There are a few different ways to go about selling your car when you have an “upside down” car loan, meaning you owe more than your car’s value. The first thing to remember is that it’s not the end of the world, nor should it stop you from buying the car you need or want. You just need to consider a couple of things first.
Do you have savings?
If you have savings in the bank that you can part with then the easiest thing to do is pay the remainder of your loan at the time of disbursement. For example:
Your old car is worth AED15,000 but you owe AED18,500, you can simply pay the remaining AED3,500 straight to the lender at discharge and that will complete your loan. Keep in mind your new car may need a little extra cash spent on it such as registration and insurance so make sure you don’t leave yourself short by paying out your loan.
No savings? Or need to keep them in the bank?
You may have savings in the bank, but you’ve put them aside for something else entirely. In this case, you can borrow the deficit from your new lender. The amount remaining on your loan once your trade-in figure is taken out is called a “shortfall”. This shortfall can usually be added to your new car loan giving you the loan term to pay it back.
An example of this is below:
- AED18,500.00 (old car loan)
- AED15,000.00 (Trade-in amount)
- Leaving AED $3,500.00 to pay
Your new car costs AED20,000.00 so you can add the AED3,500.00 and have a total borrow of AED23,500.00.
- AED20,000.00 (New car loan)
- AED3,500.00 (Shortfall)
- AED23,500.00 (total loan amount)
There are a couple of factors that determine if a financier will allow you to finance the shortfall including the age of the new car and the length of time you want your finance to be over. However these aren’t things you need to worry about, the car finance company will work that out for you.
So if you’re looking at selling your car in UAE and owe a little more than it’s worth, talk to us about your needs and we’ll tailor a solution that suits you.