Can I buy a car if I am still making payments on a another car loan?
This seems to be a common question. It's more about how it's done rather than if it can be done.
The answer to, "Can I buy a new or used car and get a new loan if I am currently still paying on an old car loan", is yes. But whether it makes sense or not, and how it's done, depends on your particular circumstances and situation.
How it works
Essentially, you pay off your old loan by selling or trading your old car, and buy another car by taking out a new loan.
However, the details are different depending on how much you still owe on your old loan, and how much your car is worth if you sell or trade it. Will you be able to get enough money by selling or trading to cover the entire remaining balance of your old loan?
If you are not sure, call your bank, credit union, or loan company and ask for your current payoff amount. Then look up the sale and trade value of your car at Kelley Blue book (www.kbb.com). Compare the two numbers.
If you still owe more than your car is worth, you are "upside down." It means you have no ownership value or "equity" in your vehicle. In fact, if you wanted to sell vehicle, you would have to add extra cash to the sale amount to fully pay off your loan — so that you can receive the "clean" title to give to your buyer. You can't sell your car without paying off your loan, completely. No more monthly payments after you sell.
Therefore, if you are upside down, you can't sell your car unless you are prepared to pay the bank the extra cash needed to close out your loan.
However, you might be able to trade at a dealer — maybe.
Here's how it works.
The dealer offers you a trade price for your old car — hopefully a fair price that is similar to the value you found at Kelly Blue Book. He's offering to buy your car from you, but at a wholesale trade-in price that is less than you could get by selling the car yourself. Since you are "upside down" the trade value won't completely cover your outstanding loan balance.
So after the dealer pays off your entire loan, including the extra amount needed ("negative equity"), he adds that negative equity amount to the price of your new car, which makes your new car even more expensive, and increases your new monthly payments.
So what's the catch?
One "catch" is that your new car becomes more expensive than you might have planned, and it puts you into an even worse "upside down" situation. If you were looking at buying a cheaper car and lower monthly payments, you might not get it.
Another catch is that when you are upside down on a loan and your car is stolen or totaled in an accident, your insurance only pays what the car is worth, not the larger amount you still owe on your loan. Without GAP insurance (not part of conventional car insurance coverage), you will be responsible for the negative equity (in cash) to pay off your loan. No more monthly payments on a car that no longer exists.
A final catch is that loan companies have tightened up considerably in the last year and no longer approve loans for more than a car is worth. If you buy a car worth $10,000 and roll in an additional $3000 in negative equity from an old loan, your lender is not going to want to give you a $13,000 loan for a car only worth $10,000. Dealers can sometimes get "creative" in adjusting the numbers in a way that hides some or all of the negative equity so that you can still be approved, but it doesn't change your payment or the fact that you're upside down again in your new loan.
If you are not upside down?
If you are not upside down on your old loan, you have a much better situation.
In this case, you can sell your car, use the money to pay off your old loan to get the title to sign over to your buyer, and use the leftover money as a down payment on a new car and loan. Simple.
You can also trade at a dealer, although you'll get less money for your car. But if that's what you want (because it is easier than selling yourself), the dealer will give you (hopefully) fair trade price for you old car, pay off your loan for you, and apply the leftover money ("equity") as a down payment to lower the cost of your new car. This only works if your loan balance is less than the price the dealer is willing to give you for your old car.
Summary
Yes, you can buy a car if you are still making payments on another car loan. However, whether it is practical or not, and how it works, depends on the value of your car and the amount you still owe on your loan.