Right now I drive a $30K car. I am thinking of trading it in for a $15K-20K car to put some cash in my pocket to start investing in real estate.
I am wondering what a lender would prefer to see on an application. Someone with $10K in savings with zero debt, or someone with $20K in savings and a small car payment around $250-$300/month?
With all the transaction fees associated with replacing your car, I'd avoid selling it.
You could do a cash-out refi on the car you already have, and that would be cheaper. But I'd only do this if you REALLY need the cash NOW.
Your debt to income ratio is one of the most important factors a lender will consider, and getting a new car loan will hurt that substantially. If I were you I'd just keep the car and save some more money.
not sure which is favorable for you situation but what I do know is:
car loans will impact your debt to income ratio, but as long as you are in the preferable % range the lender wants to see you are good
also installment debt utilization does impact your credit scores. A >95% utilized installment loan will have a negative impact on your scores. But that impact could be completely insignificant to your approval odds and rate bucket of your new loan.