May 6, 2021
You asked, we answered.
Can I Get a New Car Loan if I Already Have One?
In short: Yes, you can.
But there are some things to consider
We go over how car loans upon car loans work and find out if you can get a new car loan when you already have one.
Many people do this. They take out a car loan to buy a car, then they want to get another new car before paying off the first loan. In other words, they want a newer vehicle before the end of the loan term.
It’s easy to do.
How do you get a new car loan if you already have one?
Life changes fast. Sometimes that ‘perfect’ car you bought a few years ago won’t suffice for that growing family or newfound hobby.
If you’re wishing to get into a new car before you’ve paid off your current car loan, you’ll need to do a few things;
- Find out the payout figure from your lender
- Determine the value of your current car
- Sell, trade in or even keep your old car
- Get a good deal on the new car loan
Find out the payout from your lender
This means contacting your lender (who provided your current loan) and asking them how much to pay it off in one go.
After the payout amount is paid off, the lender will remove their interest from the vehicle, giving a clean PPSR. This means the vehicle is ‘unencumbered’ and you’re free to sell or trade in the car.
Note that the new car loan can typically cover the payout figure from the original loan and the purchase of the new car itself.
For example, if a borrower owes $10,000 on their existing car finance and wants to buy a $25,000 new vehicle, they’ll borrow $35,000.
Determine the value of your current car
Most borrowers need to know the value of their current car. This is because upon selling it, they’ll often use the funds to reduce the new loan.
Using the example above, if the value of the vehicle attached to the first car loan is $10,000, the borrower will use those sale funds to reduce the new car loan from $35,000 to $25,000. This means only having one loan attached and equal in amount to the value of the new vehicle.
To find the value of your vehicle, do some searching online. Redbook is a good starting point. Remember to factor in your car’s trim level, mileage and condition too.
Sell, trade in or even keep your old car
Most borrowers decide to sell or trade in their old car when they get their new car. This is for a few reasons;
- Avoid paying registration and running costs on two cars
- Avoid having to park/house two cars
- Using the funds from selling/trading in the old car to reduce the new loan amount
Selling your old car
Typically, used cars sell for higher prices when sold privately rather than trading them in at a dealer. Using online sales platforms such a GumTree is a good starting point.
Trading your old car in at a car dealership
This option often suits people who don’t fancy dealing with strangers coming to look at their car. The process is usually much easier too as car dealers can handle the paperwork. However, it can be tough in getting a high price on your vehicle.
If the sales price of the old vehicle is lower than the remaining loan amount
This is not uncommon, especially if the vehicle has wear and tear, damage, high mileage or is a base model.
When this happens, borrowers will have to make up the difference when paying out the original loan on the old vehicle or have the difference added to the new car loan.
Sometimes, borrowers avoid this altogether and simply gift the old car to a friend or family member.
Get a good deal on the new car loan
Ideally, a borrower looking at a new car loan when they already have existing car finance will have a good repayment (credit) history.
Having a strong credit score can really help get the most competitive rates on car loans.
Start with a quick quote to see what kind of car loan options you’ll have. OnlineLoans works with a large lender panel which gives our clients clear and numerous loan options.
Is there anything to be aware of?
The payout figure might include an early termination fee or early repayment fee so make sure to read the contract and details carefully.
Online research is important when deciding on what to do with your old vehicle as resale values can vary.
Getting a good deal on a new car finance can make a huge difference and save money.
Borrowers with a poor credit history or missed payments on the original car loan might need to amend any outstanding repayments.
The next step
With an OnlineLoans quick quote, you’ll have the ability to consider various options and, upon your selection, get the ball rolling quickly.
Other Q&A with OnlineLoans that may help
Stay tuned for more Q&A With OnlineLoans as we clear up car loan confusion.