If the time has come to acquire a new vehicle but you have not yet paid off your loan in full, you still have alternatives for trading in your current vehicle. Keep reading to learn how to trade in a car with a loan still outstanding.
The procedure will require some planning and will vary according on your level of equity.
➣ Positive equity indicates that the value of the vehicle exceeds the amount still owed on the loan.
This is a favorable location. It permits you to apply the additional value towards the price of the new vehicle.
➣ If you have negative equity or are upside down on your loan, trading in your vehicle can be difficult. This indicates that you owe more than the car is worth.
After the trade-in value has been determined, you will be required to settle the outstanding loan sum. This is a perilous financial situation.
How To Trade in a Car That Is Not Paid Off
Trading in your automobile might save you significant time and money. The money you receive can be applied to the purchase of a vehicle, so reducing its price.
If your vehicle has positive equity and you intend to trade it in for a new vehicle, follow these steps.
Before beginning the trade-in process, provide the dealership with the necessary information.
➣ A copy of your driver’s license.
➣ Income and residence documentation.
➣ Automobile title
➣ Repayment amount and account details.
➣ Automobile insurance.
1. Determine Your Vehicle’s Trade-In Value
The first step in trading in a vehicle is determining the vehicle’s value. Knowing the value of your vehicle will aid you in negotiations and help you select a new vehicle that fits your budget.
There are tools on Kelley Blue Book and Edmunds that can help you determine the value of your vehicle.
After determining the value of your trade-in, utilize it to establish how much money will remain for the purchase of your new vehicle.
Simply deduct the outstanding balance of your loan from the trade-in value.
2. Compare Several Options
Now that you are aware of the worth of your vehicle, you may confidently browse for your next automobile.
Utilize the amount remains after paying off your loan as a starting point for budgeting.
Ensure that you are receiving the greatest bargain by comparing prices from several vendors.
3. Strike a Bargain
After determining the value of your vehicle and selecting your next vehicle, it is time to finalize the transaction.
Be sure to read the fine language and do not be afraid to walk away if the price you negotiated is not reflected in the fine print.
Depending on how you decide to finance your future vehicle, pay close attention to the terms of the new loan.
Why a Vehicle with Negative Equity Should Not Be Traded In
If you are interested in purchasing a new vehicle but have negative equity on your current loan, it is recommended that you wait until you are no longer underwater before trading in your current vehicle.
By refinancing the debt, you are putting yourself and your bank account at danger.
It is possible that you may encounter dealerships who urge you to roll your negative equity into your new vehicle.
However, doing so will result in higher interest rates and loan amounts, which you do not want.
Consider this: drivers who want to complete a trade despite having negative equity are responsible for paying both the remaining loan balance and the value of the new vehicle.
Alternatives to Selling Your Vehicle
If you’re ready to say goodbye to your present car, trading it in is not the only option accessible to you.
A private sale, which may fetch a better price than a trade-in, is an excellent means of acquiring a new car while disposing of your old one.
How To Trade in a Car with a Loan Conclusion
After determining your equity, you can make the best financial option and, ideally, purchase a new automobile.
Whether you do so through a dealership trade-in, or a private sale will depend on the value of your vehicle and the balance of your loan.
How does it work when you trade a car in with a loan?
Your car loan doesn’t disappear if you trade in your car. However, the trade-in value of your car becomes credit towards your loan. This credit might cover the whole balance. If it doesn’t, your dealer will roll over your loan, combining the deficit with the amount owing on your new car.
Can you trade in a car with an existing loan?
You can trade in a vehicle even if you still owe money on its loan. In fact, it’s common for dealers to take care of consumers’ old financing. They’ll pay off the remaining loan balance on your trade-in and obtain the car’s title directly from the lender.
Is it better to pay off car loan before trading in?
When you take out an auto loan, the car is used as collateral until all the money has been repaid. In most cases, it’s in your best interest to pay off your car loan before you trade in your car.
Does your car need to be paid off to trade in?
If you have negative equity or are upside down on your loan, a trade-in can be a bit more challenging. This means that you owe more on the vehicle than it is worth. It’s a precarious financial situation where you will have to pay the remaining loan balance after the trade-in value is assessed.
Does selling a financed car hurt your credit?
If your car is worth as much as or close to the balance on your account, selling it could enable you to pay off the loan without harming your credit.
Can I give my car back to the finance company?
If you financed your car with a Personal Contract Purchase loan and you’ve already paid off at least 50% of the amount owing, you can hand it back to the lender. Keep in mind that this 50% figure also includes fees and interest.
How long should you keep a car before trading it in?
If the vehicle is new, you should ideally wait until at least year three of ownership to trade it in to a dealership, as this is when depreciation normally slows down. If it’s used, it already went through the big drop in depreciation and you can usually trade it in after a year or so.
At what mileage should I trade in my car?
Third milestone: Under 100,000 miles Because depreciation is constant, it’s best to sell or trade in your vehicle before it hits the 100,000-mile mark. At this point, you won’t get nearly as much for it because dealers generally see these cars as wholesale-only vehicles to be sold at auction.
What happens if I don’t want my financed car anymore?
If you simply can’t afford your car payments any longer, you could ask the dealer to agree to voluntary repossession. In this scenario, you tell the lender you can no longer make payments ask them to take the car back. You hand over the keys and you may also have to hand over money to make up the value of the loan.
Can I sell my car back to the dealership?
Selling my car when it’s on finance or PCP deal? You can sell your car to a dealership even if it’s on finance from another dealership or lender.
Can I hand my car back after 3 years?
You can return it, but you’ll probably have to pay back any remaining money you owe on the contract, so if you still have a year left, then the lender will expect a year’s worth of fees up front.
Is it cheaper to lease or buy a car?
Advantages of leasing a car is much cheaper than buying it outright, because you’re only paying a percentage of the total price. You won’t have to worry about fetching a good price or finding a buyer for it when you’re done, as the dealership will take it back from you.
Will a car dealer settle my finance?
Will a car dealership settle my finance? Another short answer: yes. This is a popular process for people looking to upgrade or change their car before paying off the total outstanding finance.
Can I swap my financed car for a cheaper one?
If the trade-in value is less than what you owe on the vehicle, the lender will pay off the loan, but the remaining balance will get rolled into the new loan on the cheaper car.
Can I swap my car for another?
If you have a positive figure, great news! You can use this amount of money as a part exchange for your next car. However, if the figure is negative, you’ll need to pay that amount of money on top of your new car’s price. So, it’s still possible to swap your car but being in negative equity can make the swap costly.
