Here is my question, I have about 5500.00 balance on my bike. When I say I want to trade-in how does the dealer do this. Do they pay off the loan and take that amount and apply it in the price of a new bike?

Thanks in advance for replies.

 

Exactly.

 

The answer would be yes if they are giving you a trade amount equal to or less than your loan.

 

Yes, the difference between what they give you and what you owe will be rolled into the new loan. The problem with this is that the interest rate will also increase because the bank will now be financing a $15,000 bike for $20,000. they do this because if you were to default on your loan they would have a bike that they owe more on than it's worth.

Make sense?

 

Sell the bike yourself first. You'll get about 33% more than the dealership will offer you on a trade.

 

Your goal would be to get the dealer to appraise your trade for an amount HIGHER than what you currently owe.

By law, the dealer will have to pay off your loan when they take your trade, regardless of state or lender. Consumer bank loans fall under federal laws. If your loan isupside-down, meaning you owe more than the bike appraises for, the dealer will make up the difference by adding that amount onto your new purchase price.

Like TheBarron said, you will get punished with a higher interest rate if you end up borrowing more than the value of the new bike.

At whatever effort necessary, try to come up with a cash down payment to offset the "Upside-down" loan, or work harder with a couple more appraisals from other dealers to squeeze the best value out of your existing bike. It becomes a vicious cycle that is hard to break. The new bike, unless rectified, will be immediatly upside-down in value (again) as soon as you drive away.

Best of luck.

 

Harley Credit does not do Negative Equity Loans anymore. This means if you combined payoff and amount to finance is higher than the motorcycles (90%) value, they will not approve. You or the dealer must payoff the existing loan to start new. Alot of dealers do this some don't. Alot of banks will do with A creditors or credit history with the bank.

 

If you owe 5500 and the dealer gives you 5500 trade allowance than it's a wash...If you owe 5500 and the dealer gives you 7500 trade in allowance, that 2000 equity is applied to the new bike as a 2000 down payment...if you owe 5500 and the dealer only gives you 4000 trade in allowance, you are upside down and that 1500 difference is added to the new loan....the dealer always pays off the old loan to get title of your trade in so they can sell it....otherwise you would get 2 payment notices from the bank.. one for each loan...sometimes the dealer is "late" in paying off the loan and you may get a past due notice on your old loan...the old loan is your responsibility until it's payed.
another thing to consider: If you trade in your bike and say you get 7500, that trade in amount will be subtracted from the new bike and that difference will be taxed. So say your buying a 15000 bike

ex. 15000-7500 trade= loan amount of 7500 plus (7500 times tax rate)

if you sell your bike youself for say 8000, you get taxed on entire 15000

15000 plus (15000 times tax rate)- 8000 down payment= loan amount

so make sure you sell your bike for more than what the trade in value plus the tax on that value would be

this concludes the lesson

 

Yea, what Carpet Ride said. He is right. Well put. I do know of some Dealers that will not want to pay off existing notes, so they will not want the trade. Some don't want to let go of their money.

 

Yep, carpet ride has it.

I wasn't clear enough in my explanation about negative equity and trade-in value.

What are you trading in?