Trading in car for less expensive model?

Question

I recently bought a convertiblee (Audi TT) and I still have about 27k left to pay off on it. Now I just found out that my wife and I are going to have a baby. Now for obvious reasons, I can't keep the twoseat-err and we've been thinking of getting an SUV (Rav4 in particular) as it would be help having a larger vehicle plus it'll be cheaper in theory.

Now the question is, I owe 27k which is more than a Rav 4 costs...so my question is, is it possible to make this trade and if so, is it good/bad to make this trade and why? Thanks,

Answer 1

Your Audi is now a used car, and the initial depreciation on a new car means you owe more than you can get in trade. You will either have to pay the difference between the trade-in amount and the amount owed, or the dealer may be able to roll this negative equity into the new loan. This effectively increases the amount you are paying for the new car and even on a less-expensive car, your payments may be as much or more than you're paying now.