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Key takeaways
- Dealerships may offer rolling over your loan as an option when you want to upgrade to a newer or better vehicle, but it is typically not the best choice for your finances.
- When you roll over your car loan, you risk building negative equity and potentially defaulting.
- You can avoid rolling over your car loan by waiting to purchase a different car until your current loan is paid off.
If you have your eyes on a new or used car, trading in your current model is the most common way of switching rides, but it only reduces your next car’s cost if you have positive equity, meaning you owe less on your vehicle than it’s worth.
“Usually it doesn’t make a ton of sense to roll over a car loan,” says Zander Cook, co-founder and chief revenue officer of Lease End. “Trying to pay it down is usually the smarter financial decision.”
If you have negative equity, lenders and dealers may offer to roll over your current loan into your new one. While the process sounds convenient, it isn’t exactly the smartest move since it will increase the negative equity of your vehicle and raise your terms of interest and monthly payment, making it more difficult to trade in or sell in the future.
How does rolling over your car loan work?
Rolling over your car loan is the process of adding the negative equity, or remaining car loan balance, of one vehicle loan into the next. If you are trading your car but still have a current balance that exceeds the trade-in value of your vehicle, dealers may offer to roll your previous balance into your new vehicle loan.
For example, if you have $15,000 left on your auto loan, but your car is only worth $10,000, a lender may offer to wrap that $5,000 into your next loan. This will increase the amount you borrow to more than the new vehicle is worth.
Bankrate’s take:
Unless you need to, it is often a better financial decision to keep driving the car you have until you pay off your loan. After that, you can sell or trade it in without having to worry about rolling over the loan amount.
The risk of rolling over your car loan
Negative equity is also known as being upside down on your loan. Being upside down isn’t always an issue, especially if you plan to keep your car for the long haul, but if you want to sell the car, you may be left paying the difference between what it is worth and what you owe.
Your monthly cost will also likely increase as you will be paying for more than just your new vehicle. You’ll also be paying more car loan interest over time. If you’re not careful, you may end up in a cycle of repeatedly rolling your loans over.
Sometimes people combat this. If they have a bunch of negative equity, they’ll try and buy a new vehicle that has a lot of rebates to counterbalance the negative equity.
— Zander Cook, co-founder and chief revenue officer of Lease End
Negative equity auto loan payment calculator
Want to know how much you’re going to be paying when rolling over negative equity into your new loan? Bankrate’s here to help.
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3 Alternatives to rolling over your car loan
Before agreeing to roll over your car loan, consider other options. Here are some alternatives:
1. Paying off your current loan first
The best option is to pay off your current loan before signing off on a new vehicle. This will ensure that costs are not building on one another and lower your risk of becoming upside-down. There are many ways to pay off your loan faster, like refinancing, removing unnecessary add-ons or extra payments.
Almost 99% of auto loans these days are simple interest loans, meaning there’s no penalty for prepayment or early payment. You can pay extra every month [or you can] make a double payment and pay it off in half the time.
— Zander Cook, co-founder and chief revenue officer of Lease End
2. Buy a used car
If you must purchase another vehicle immediately, consider buying used. Although there is still the risk that comes with any loan rolling into a previous one, you will likely finance it for less, thus lowering any debt.
3. Sell your vehicle privately
To get rid of your current car, consider selling it privately rather than trading it in at a dealership. You will likely make more money this way and then can have more to put as a down payment on your next car.
How to avoid the need to roll over your car loan
Buying a less expensive vehicle and choosing to lease can be savvy alternatives that help you avoid rolling over your car loan in the future.
1. Buy a less expensive vehicle
To avoid paying off a car for longer than you plan on driving it, use a car loan calculator to find out if you can afford opting for a shorter loan term on a lower-priced vehicle. The longer your term, the more time your vehicle has to depreciate, so choosing a term under 60 months will help you avoid negative equity.
Before you start shopping, check out Bankrate’s choices for the best value vehicles. You can also look at Kelley Blue Book or Edmunds for their estimates on how much a make and model will be worth in a few years.
2. Lease instead of buying
If you typically trade up to a new vehicle before your old one is paid off, you may want to consider leasing. Typically, leasing costs less per month than buying an equivalent car. For example, Experian’s State of the Automotive Finance Market report for 2025’s first quarter shows the average monthly payment on a new leased car was $142 less than the average new car payment.
Keep in mind:
Leasing means being subject to mileage limits you don’t have to deal with when you purchase a car. You may also have to pay fees at the end of the lease depending on the terms and your usage of the vehicle.
Lease vs. buy calculator
Wondering whether you should buy or lease? Bankrate’s calculator is here to help figure it out.
Crunch the numbers now
Bottom line
While the need for a new vehicle can be unpredictable, try to avoid rolling over your current loan into a new one. Wait to buy your next car until after your current loan is paid off. Rolling over your car loan is a financial risk that could mean taking on more debt, which can impact your finances beyond your auto loan.
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