By John Campbell

If you owe thousands more than your current vehicle is worth at resale, trading it in today may not be in your best interest. Your primary goal should be to minimize the amount of cash you’re upside down in your current auto loan before getting into another one.

Since you probably won’t get the full trade-in value of your vehicle from a dealership you may want to get a new vehicle from, you should consider a few alternatives. Perhaps the smartest thing to do is just wait to trade-in your vehicle until you can at least get what you owe on it in trade. If you’re paying a high interest rate on your current auto loan you may want to look into refinancing the loan. As long as you don’t stretch out the term of your next loan beyond the amount of time remaining on your current loan term, you’ll be able to get out of being upside down faster than you will currently.

Of course, a refi may not be possible depending on your current credit score and if you’ve moved or switched jobs within the last 6 months. If your auto warranty is expired, your current vehicle tends to require many costly repairs or has crappy gas mileage; you may want to get rid of the vehicle as soon as possible. Before trading it in, you might want to try selling your vehicle on your own. The amount of cash you could generate from selling your vehicle independently may be more than you would get in trade-in and reduce the amount of money you’re upside down for. The better the condition and lower the mileage on your current vehicle, the more money you’ll likely generate selling it on your own.

Always keep in mind that the more you’re upside down in your current auto loan, the longer you’ll be upside down in your next auto loan. Being upside down in any loan will make it more difficult for you to get out of debt in the long run.

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John Campbell is the writer and editor of CashBuzz, A financial portal for the rest of us. Check out cashbuzz.com for the latest articles on money management and tips and tricks that can help improve your finances. This article may be reprinted on your Web site if the copyright, author information and active link are included.