Add the old loan to your new car

Hi Mr Tan,

I would like to know what is meant by "overtrade" with regards to car purchases.

I currently drive a car which I bought about two years ago with zero downpayment. As such, if I sell the car now, I have to pay for the shortfall between the outstanding loan and the selling price of the car.

I have heard of "overtrade" arrangements which will allow people in my situation to purchase a new car, with zero downpayment, and with the shortfall on my existing car "added on" to my new car loan

What do you think of such overtrade arrangements? Is is nessarily a bad thing if I can reduce my monthly instalments (given that cars are cheaper now) and also extend my COE ?

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REPLY:

Generally, it is a good idea to reduce your total cost of ownership.

I hear that the new arrangement allows you to:

* benefit from the lower cost of buying a new car
* your repayment under the new loan (including the balance of the earlier loan) wil be lower
* you do not incur any excessive penalty on the old loan

This new arrangement appears to be all right for me. You probably have to consider
that your new car, which has a lower COE value, may be worth less than the old car,
if you have to give it up later.

If you intend to use your new car for its full life, then this point does not matter.