If you’re trading in a car you owe money on, you’re looking at one of these two situations:
- You have positive equity: If your car is worth more than the amount you owe, then it should be smooth sailing. You can easily apply that difference toward the purchase of a new car.
- You have negative equity: If your car is worth less than what you still owe, then you’ll have to pay the difference between the loan balance and the trade-in value. ...
Full Answer
Can I trade in my car if I still owe money on it?
Yes, you can trade in your car even if you still owe money on it! It is a common practice, so you shouldn’t have any issues when doing so. Shop around at multiple dealerships to get an idea of which is offering the best rate and trade-in value for your car.
Can I trade in my car I still owe on?
You can trade-in your car to a dealership if you still owe on it, but it has to be paid off in the process, either with trade equity or out of pocket. Trading in a car you still owe on can be a costly decision if you have negative equity. Trading in a car you still owe on.
Should I pay off my car or trade it in?
The decision of whether to pay off acar loanearly depends onseveralfactors, including your financial situation, your loans interest rate and your other financial goals. In general, you should pay off your car loan ... try to sell or trade in the vehicle ...
How to sell a car you still owe money on?
- Cover the difference out of pocket. If the amount isn’t too high — say around $1,000 or so — you may be able to pay it off, especially if you ...
- Reach out to your lender. Once you know how much negative equity you have, it’s best to go over all your options with your lender. ...
- Wait. ...
- Sell your car privately. ...
How do you trade in a car that is not paid off?
Going to a dealership to trade in a car that still has a loan can be almost as simple as trading in a car you've paid off. The dealer will pay off the existing loan and get the title directly from the lender. The dealer will also take care of all the paperwork.
How does it work when you trade in a car you still owe money on?
When you trade in a vehicle you still owe money on, the dealer takes over the loan and pays it off on your behalf. They also typically handle the process of transferring the title.
Is it a good idea to trade in a financed car?
Trading in a car with a loan is possible, but it can be costly depending on how much you owe. If your car is worth more than you owe on it, you may be able to use the difference toward the purchase price of a new vehicle.
Does my car need to be paid off to trade in?
That said, it's still possible to trade in your car before it's paid off. As long as you're not behind on your car payments, most dealerships will allow you to transfer the remaining amount of your loan to the new car's loan.
Does trading in cars hurt credit?
The hard inquiry will simply lower your credit score a few points for up to two years. So, from a credit score perspective, you're really not going to help yourself in this scenario (although it's not like you're going to be plummeting yourself either).
What is a disadvantage of trading in a car?
The major drawback when it comes to trading in your car is money. Simply put, your vehicle is only worth what the dealer is willing to give you, and there is little room for negotiation. Factors that affect trade-in-value include: The Profit Margin The dealer needs to sell your trade-in and make a profit.
How long should you keep a car before trading 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.
What is the best time to trade a car in?
If you intend to trade in to purchase a new car, the end of the calendar year is one of the best times to buy a car. As manufacturers close out the production of the current model year, dealerships are preparing to clear inventory to make room for the new model year.
Can I sell my car to CarMax if I still owe on it?
Will CarMax buy my car if I owe on it? Yes. You'll need to provide loan information so CarMax can pay off the lender. If you owe more than your offer, you will need to cover the difference.
What is the best mileage to trade-in a car?
30,000 To 40,000 miles The depreciation of your vehicle will generally begin to accelerate faster after this milestone, so the closer your car is to this mileage, the better your trade-in will likely be.
How do I know if I have positive equity in my car?
You reach positive equity on a car once the market value of your car surpasses the principal amount of your loan. Let's say you take out a $20,000 loan for a $25,000 car, and you made a $5,000 down payment. If that car's current market value is $23,000, then you would have $3,000 in positive equity.
Should I tell the dealer how much I owe on my trade?
The dealer must know the payoff if you are using your car as part of the deal. If you do not tell them, they will call the lender and ask when they find out that you want to use it as a trade i .
Can you trade in two cars that are not paid off?
The answer is “yes!” Trading in a financed car is possible, but keep in mind that the loan on the car loan won't go away because you've traded in the car. The balance will still need to be paid.
How do you trade in a car that is not paid off with positive equity?
A: If you still owe money on the car, you can trade it in for a cheaper one. If, for example, you owe $15,000 and the car is worth $20,000, the dealer can purchase the car as a trade-in, pay off the loan, and put the $5,000 toward your new auto loan as equity.
Can I sell my car to CarMax if I still owe on it?
Will CarMax buy my car if I owe on it? Yes. You'll need to provide loan information so CarMax can pay off the lender. If you owe more than your offer, you will need to cover the difference.
Can I trade in my car if I still owe on it CarMax?
Yes! CarMax will buy a car with a loan on it in most cases. Unless you're way too far upside down on the loan, CarMax is likely to purchase the car from you. If you want to sell a vehicle to CarMax that still has a car loan on it, schedule a meeting or walk into a branch near you.
What is the difference between what your car is worth and how much you owe?
But when your loan balance is higher than the trade-in value of the car , this is known as negative equity (commonly referred to as being upside down or underwater).
What happens if you have a balance on a loan?
The balance increases the size of your new loan, leading to higher monthly payments and increased interest charges. It could limit your financing options, as the inflated balance could lead you to be unable to qualify for certain loan programs or vehicles.
Can you trade in a car if you still owe?
Trading in a car when you still owe on it isn't a problem when you have equity in it. The dealership will pay off the old loan and either give you the cash or use the rest as a down payment on your new car. When you still owe and have negative equity, however, you're responsible for the difference even if you trade in the car before it's paid off.
Can you trade in a car before it's paid off?
Car dealers are happy to take a trade-in before it's paid off. Make no mistake – you still need to pay off the original loan to remove the lien from the car, but the dealership will generally do that as part of the trade-in process. You’ll want to know the payoff value of the loan (which you can get from your existing lender) ...
Can you trade in a car with negative equity?
If – and we emphasize "if" – the lender allows you to trade in a vehicle with negative equity, the difference between what you owe and what your car is worth isn't going away. Instead, the balance will be rolled into your new loan, which causes a few problems:
How to pay down a car faster?
For example, consider paying down your loan faster by making additional, principal-only payments." Another alternative is selling the car yourself and trying to get more money for it to help pay off your loan. 2
How much does a car cost when you buy it for 20,000?
If you're buying a car for $20,000, and the dealer will give you $5,000 for your trade-in, your net cost will be $15,000. That's the amount you'll have to pay in cash or borrow in the form of a car loan . In many states, you'll only have to pay sales tax on the net cost of the new car. So, for example, if your state's sales tax is 8% ...
Is it worth selling a car?
Selling your car by yourself is more work (especially if you are still paying off a car loan ), but it may be worth it if you have the time. A relatively easy way to reach potential buyers is by advertising on one of the major used car websites .
Can you sell your car to a private party?
Consider Selling Your Car to a Private Party. The amount of money you'll get by trading in your car is generally less than you could get by selling it to a private party. When the dealer takes your car as a trade-in, they're planning to sell it to someone else. They can't offer you its full value, because they need to make a profit.
Can you trade in a car with a dealer?
Trading in your car with the dealer makes the process much simpler, but you'll most likely get less money than if you sold it to a private party. You'll have to decide whether the convenience is worth the difference in price.
Do you have to pay sales tax on a car?
In many states, you'll only have to pay sales tax on the net cost of the new car. So, for example, if your state's sales tax is 8% and your trade-in is worth $5,000, you could save $400 in taxes. It's worth remembering that when you're buying a car, (almost) everything is up for negotiation, and the value of your trade-in is part of that.
Can a dealer pay off a car loan?
Your dealer may offer to pay the loan off for you, but be careful if your old car has negative equity—that is, if it's worth less than you still owe on the loan, which may be the case if your car is relatively new.
How to pay off a car loan?
These are the steps you should take: 1 Find out how much you still owe on your current vehicle. Get the “payoff amount” from your current lender. This is the amount it will take to pay off your existing loan, and it may be different from any outstanding balance listed on your statement or coupon book. This difference may be because of a prepayment penalty or the way interest is calculated; 2 Research your trade-in’s value, so you will know if the amount you still owe on your trade-in is less than it is worth, make sure during any negotiations that you consider whether you are getting fair value for your trade-in and you are able to fully pay off the old auto loan. 3 Decide if you are going to pay off your existing loan now, wait until you pay off your old auto loan before you borrow for another vehicle, or include the amount that you still owe on your current vehicle in your new auto loan; 4 If you owe more on your current vehicle than it is worth and you roll the balance of your existing auto loan into your new auto loan, this could make the new auto loan much more expensive. Your total loan cost will be higher because you will be borrowing more than just the price of your new vehicle.
Why is my auto loan so expensive?
If you owe more on your current vehicle than it is worth and you roll the balance of your existing auto loan into your new auto loan, this could make the new auto loan much more expensive. Your total loan cost will be higher because you will be borrowing more than just the price of your new vehicle.
How long does it take to find out if your auto loan has been paid off?
After about a week, use the contact information to find out if your old loan has been paid off.
What to do if your loan has not been paid off?
If your loan has not been paid off, contact the lender. If, after reasonable efforts, your loan has still not been paid off, you may want to consider submitting a complaint to the Federal Trade Commission , or with the CFPB online or by calling us toll-free at (855) 411-CFPB (2372).
Do you have to pay off your auto loan if you trade it in?
If your auto loan payoff amount is more than the dealer is willing to give you for your trade-in then you will still have to pay off what you owe on your old vehicle even if you trade it in. You should consider whether it makes sense to go through with the new purchase, because in this circumstance your new loan will include ...
How to get a trade in value for a car?
Luckily, it’s relatively easy enough to get an estimate on your vehicle’s trade-in value nowadays. You can use sites like NADAguides or Kelley Blue Book and enter in your car’s information and get a ballpark valuation. Compare those estimations to your financed vehicle’s loan balance.
What does it mean when you owe more on a car than it is worth?
If you owe more on your car than it’s worth, it could mean trouble. We cover both sides of the equity coin. But first, before you head to the dealership, you should get a rough idea of what the estimated value of your vehicle is so you can tell what equity position you’re in.
What to do if you don't owe a car loan?
If you don’t owe much more than your loan balance, you could simply pay that difference in cash to pay off the loan and remove the lien. Or, you could give yourself a few months and work to pay down your loan to get yourself in an equity position, and then trade the financed vehicle in.
What happens if you owe less on a car?
If you owe less on the car than it’s likely to be valued at, then you’re most likely in an equity position – great! If you owe more than the vehicle’s estimated value, you’re in a negative equity position – not so great.
What happens if you sell a car with negative equity?
If your car has negative equity, the trade-in value you’re likely to get can’t help you knock down your next vehicle’s selling price, and you may not even get enough from the dealership to pay off your current loan to be able to sell the car.
How much down payment do you need for a car with bad credit?
Typically, a bad credit lender requires a down payment of at least $1,000 or 10% of the vehicle’s selling price (sometimes whichever is less).
What happens when you take your car to a dealership?
When you take your vehicle to a dealership, the dealer is the one that determines your trade-in’s value. They’re going to look it over, and probably start it up and take it for a drive. After your car is looked at and appraised, you’re given an offer. Since you’re still financing your trade-in, you need enough to be able to pay off your current ...
How to trade in a vehicle?
Always treat trading in a vehicle as a separate transaction. Agree to the purchase price of the vehicle you’re buying first and then negotiate the price they’re giving you for your trade. This will keep them from manipulating numbers and make it easier for you to tell how much they’re offering you for your vehicle.
Why do you ask for your keys when you trade in a car?
When you tell a salesperson you have a vehicle you would like to trade in, he or she will ask for your keys so they can retrieve some information from your vehicle.
What happens when you tell the dealer you have a trade?
Dealers like to find out if you have a trade early in the car buying process. Most dealerships have one or two designated people that value all the used cars coming in on trade. The timing of the process may be a little different, but the actual appraisal process is basically the same amongst all dealerships.
What does the car appraiser look for?
If he’s good at what he does, he will walk around the entire car to get an overall view of the body and paint condition of the vehicle, also checking the tires for tread wear.
What does a salesperson do when you trade in?
A salesperson or manager will walk around your trade-in and touch or point out every little dent, crack, worn tire, scratch, or imperfection, and not say a word. They may nod or scratch their head, looking concerned, to let you know they have found a discrepancy.
What do salespeople do when selling a car?
A good salesperson will use certain sales techniques when inquiring about information on your trade. They may even ask you to come out to your car with them to help, “sell your car to their manager.” They’ll begin writing information down like the year, make, model, and mileage from your car for the used car manager or appraiser to use later during the appraisal process.
Why are dealers missing new and used car sales?
Good dealers believe, if they are making money in wholesale, they’re missing new and used car retail sales because they’re not giving enough money for trades.
How A Trade-In Works When You Still Owe
The Problems with Negative Equity
- The difference between what your vehicle is worth and how much you owe on itis known as equity. But when your loan balance is higher than the trade-in value of the car, this is known as negative equity (commonly referred to as being upside down or underwater). Negative equity is quite common these days – where vehicle prices are high and long loan terms are common – d…
The Bottom Line
- Trading in a car when you still owe on it isn't a problem when you have equity in it. The dealership will pay off the old loan and either give you the cash or use the rest as a down payment on your new car. When you still owe and have negative equity, however, you're responsible for the difference even if you trade in the car before it's paid off. ...
Selling your old car to a car dealer is easy but may not get you the best price
- If you're looking to buy a car, you may have an existing vehicle that you'll no longer need. One opt…
Trading in your old car can make buying a new one less expensive. - If you have a car loan on your old car, you'll need to pay it off.
You may get more money selling your car to a private party, which you can then use toward a down payment on the new one.
Using a Trade-In to Lower the Cost of Your New Car
- If you're buying a car for $20,000 and the dealer will give you $5,000 for your trade-in, your net co…
In many states, you'll only have to pay sales tax on the net cost of the new car. So, for example, if your state's sales tax is 8% and your trade-in is worth $5,000, you could save $400 in taxes. - It's worth remembering that when you're buying a car, (almost) everything is up for negotiation, a…
Because of that, some experts suggest not mentioning that you're trading in a car at first. Instead, negotiate the lowest possible sale price for the new car. Then mention that you'd like to trade in your old car and ask how much the dealer will give you for it. You will most likely need to bring it …
Consider Selling Your Car to a Private Party
- The amount of money you'll get by trading in your car is generally less than you could get by selli…
Selling your car by yourself is more work (especially if you are still paying off a car loan ), but it may be worth it if you have the time. A relatively easy way to reach potential buyers is by advertising on one of the major used car websites .
The Bottom Line
- Trading in your car with the dealer makes the process much simpler, but you'll most likely get less money than if you sold it to a private party. You'll have to decide whether the convenience is worth the difference in price.