The time has come for you to replace your current financed vehicle with a fresh model or a different car. You might be wondering: Can you trade in a financed car?
People can indeed trade in cars that have existing loans. Trading an active loan vehicle presents unique rules that affect such deals. This guide will provide you with essential information about trading automobiles that remain under finance to assist your decision-making regarding both your money and upcoming driving needs.
Find Cheap Auto InsuranceCan You Trade in a Financed Car?
Exchanging a vehicle with an ongoing loan remains possible for car owners. Your existing car loan balance payment amount will be covered by the dealership, while its trade value helps finance your new purchase. Learning about the distinct process of trading versus trading for a fully owned car will prevent unexpected results.
The following list shows what happens when you trade in a vehicle with outstanding financing.
Understanding the Loan Balance and Trade-In Value
Two crucial financial elements appear during a financed car trade: the present loan amount and the dealership value of the vehicle. The amount the dealership offers for your car is known as the trade-in value, while your total debt to the lender stands as the loan balance.
A car trade-in with a value higher than the outstanding loan balance results in positive equity. When the dealership purchases your car through a trade-in, they will satisfy your loan debts before giving you the remaining funds that you can add to the purchase of your new vehicle. Once you borrow $10,000 on the loan and get $12,000 for your trade-in value, then you will receive $2,000 as a credit toward purchasing your next automotive.
Trading in a vehicle with negative equity makes you responsible for continuing to pay off the remainder of your loan. You can purchase a new vehicle from a dealership by allowing them to include any car loan negative equity on your old vehicle in your new loan payments.
Steps to Take When Trading in a Financed Car
After understanding that financed cars have trade-in possibilities, we will explore step-by-step procedures that guarantee a smooth trading experience.
1. Check Your Loan Balance
Before heading to the dealership, contact your lender to find out how much you still owe on the car. This is called your loan payoff amount. It’s important to know this because it will help you understand your options when trading in the car.
2. Get Your Car Appraised
Before determining a trade-in value, it is crucial to know the exact amount of debt from your loan. You should check with several dealerships and use online tools to understand your vehicle’s exact worth. Market factors and vehicle age, condition, and mileage, along with market demand, will determine the trade-in value of your car.
3. Evaluate Your Equity
To understand your equity situation, first calculate the difference between loan payoff and trade-in value to check if your equity is positive or negative. You will have better options when trading your car for a new one since your equity amount is positive. You should have funds prepared for paying negative equity or decide to re-establish the current debt through another loan.
4. Consider Your Financing Options
The amount of negative equity you have needs careful evaluation before choosing your future vehicle. Including negative equity when financing your next loan results in higher borrowing levels that may increase monthly payments as well as accumulated interest. Before accepting new loan terms, you should check if they fit within your financial plans.
5. Negotiating the Deal
The process of trading your current vehicle includes negotiating the offer for your old car and establishing the loan conditions for the next vehicle purchase. Before accepting any trade-in deal from the dealership, possess information about your vehicle’s actual worth and the outstanding loan value. Use these numbers as benchmark values to prevent unfair pricing.
What to Do if You Have Negative Equity
It becomes crucial to think through your possibilities when your automobile proves worth less than what remains on your loan. To proceed, consider following these action steps.
1. Pay Off the Difference
It becomes beneficial before trading in your vehicle to eliminate debt on the current loan, if possible. Trading in cars with negative equity must be done carefully to prevent transferring the debt into new loans while maintaining affordable mortgage payments. If you have no available cash for payments, you should check your options, including refinancing your loan to minimize your monthly expenses.
2. You Can Add Negative Equity to Your Following Loan
The remaining negative equity can be included in the next loan if you cannot afford to eliminate it from the current financing. With this method, you are expanding your loan amount while facing increased month-to-month payments and enhanced interest costs for the loan duration. Numerous vehicle purchasers opt to keep their negative equity when trading cars because this approach is frequently encountered in the market.
3. Consider a Lease
Those who wish to lease a new vehicle might find relief through this equipment. Using a lease option enables you to trade in for a new vehicle with reduced monthly expenditure while helping your finance agreement accept negative equity calculations. Consult with the dealership regarding the lease agreements to understand how the extra payment affects them.
Tips for a Successful Trade-In
Using these trading tips will help you achieve the highest possible value during a vehicle trade-in process when the car is financed.
- Before you start to negotiate your trade-in value, undertake thorough research about your vehicle’s real worth values. The online resources Kelley Blue Book and Edmunds will provide you with exact trade-in cost estimations for your car.
- Minor damages in your automobile should be repaired before submitting it for trade. Clean vehicles with proper maintenance will achieve better prices when the owner decides to trade them in.
- Present Your Current Loan Situation Truthfully to the Dealership by Discussing Your Owed Amount. Your situation will help the dealer make educated decisions to provide you with the most suitable choices.
- Your time should be devoted to examining multiple options while visiting multiple dealerships. The process of trading in a vehicle carrying negative equity demands extra time to check the payment terms until you feel satisfied with them.
Can You Trade in a Financed Car?
Trading your car while still having a loan is completely feasible because it provides an opportunity for a vehicle upgrade without requiring you to settle your existing loan. Success in trading your vehicle depends on knowing the market value of your car, your current loan amount, and any remaining equity that may influence your future purchase costs. The right preparation combined with research enables you to successfully handle the process of obtaining a new car irrespective of your positive or negative equity position.
Find Cheap Auto InsuranceBefore trading your financed car, it is essential to check your current loan balance and receive an appraisal while being prepared to bargain with potential buyers. Your decision-making process about trade-ins remains straightforward when you obtain the right information needed for selecting both valuable cars and affordable models.