Should I “Roll Over” My Old Car Loan If I Have Bad Credit In Canada?

Automotive Finance, Credit Education

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rolling over a car loan

If you’re shopping for a used car in Canada, and you have bad credit, you may have some questions about the best way to get a good deal on a used car.

If you’re still paying off your old car, for example, but you don’t want it anymore – maybe it’s unreliable, or it gets poor gas mileage – you might be thinking about “rolling over” your car loan when you get a new car.

In this article, we’ll explore this topic, and help you understand if “rolling over” a loan is a good idea.

What Is “Rolling Over” A Car Loan?

Many car dealerships will offer you the chance to “roll over” your old car loan into a new one if you still own a car that you’re paying off.

This is common when you’re “upside down” on a car – in other words, when your car is worth less than the remaining amount on your auto loan.

“Rolling over” a car loan lets you fold the amount you owe on your old car into your new auto loan.

For example, if you had a car worth $8,000, and you still had $10,000 left to pay on it, a car dealership may offer to add the $2,000 to the price of your auto loan when you buy a new vehicle. Then, you’ll be paying back that $10,000 loan, as well as the value of the loan you take out to get a new vehicle.

So, is rolling over your negative equity a good idea? NO!

“Rolling Over” Can Put You In A Worse Financial Situation

If you roll over your old debt into a new car loan, you may find yourself having trouble making monthly payments. This is especially true if you have bad credit, and have to take out an auto loan at a 10% interest rate – or higher.

You will be paying interest on both your old auto loan and your new auto loan – which means that, in the long run, you will be paying much more for your car than it’s worth. How much more? Let’s do some math.

If you purchase a new car for $25,000 at a 5% APR with on a 5-year loan term, you’ll end up paying about $28,000 for the vehicle, so about $3,000 of your payments will go to interest.

At the end of the 5 year term, your car will likely have depreciated to about 40% of its value when it was brand-new – so, about $10,000.

However, if you make the same purchase with an outstanding loan balance of $10,000 on your current car, and roll it over, you’ll be paying $35,000 at a 5% APR.

Your monthly payment will be much higher, and your loan will cost you nearly $40,000, with almost $5,000 paid as interest. And, at the end of the 5-year term, you will still end up with a car that’s only worth $10,000.

What Should I Do Instead Of Rolling Over My Debt?

If you need a car and have to get rid of your current car, it may seem like rolling over your debt is the only option. However, it’s not.

The best way you can get out of debt and get another car is by selling your current vehicle, and then shopping for a cheap, high-quality used car.

You can put the money that you got from selling your car towards the outstanding principal of your auto loan. Then, by shopping for an affordable car that’s in your price range – and making a large down payment – you can get a much cheaper monthly car payment.

You’ll save money by doing this – and you don’t risk damaging your credit due to high monthly car payments, or a car repossession.

Need An Affordable, High-Quality Used Car? Shop At Ride Time Now!

Even if you have bad credit, you shouldn’t roll over your old car loan into a new car loan. So start shopping for affordable, high-quality used vehicle at Ride Time now!

We have a great selection, and we work with Canadians with subpar credit. No matter your credit score, you can find a vehicle that’s right for you. Start shopping now, and see what we can do for you!


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