If you’re looking to get a new vehicle but still paying back loans on your current car, you may have asked yourself, “Can you trade in a car that’s not paid off?” In many situations, trading in a car even when it’s not entirely paid off is a distinct possibility. However, in some circumstances, this option can be expensive, so it’s important to do your research before making any decision. Read on to learn more about what you need to know before you decide to trade in a car that has unpaid loans. If you have any questions, give us a call at (201) 200-1100.
Can You Trade in a Car That’s Not Paid Off?
While there’s nothing more exciting than hitting the open road in a brand new vehicle, it’s important to take into consideration your finances before making any decisions about whether to trade in your existing vehicle or get a new one. You might feel excited to learn that it is possible to trade in your own vehicle for a new one even if you have outstanding loan payments. It’s important to know, however, that this process can vary depending on numerous factors.
What To Know About Trading In a Car That’s Not Paid Off
One of the main things that can affect the process of trading in a car that’s not paid off is your current equity status. Below, we explain the primary differences between having positive or negative equity on your car when trying to trade in a vehicle that you haven’t finished paying for:
If You Have Positive Equity
In the world of cars, positive equity means that your car’s value is higher than the amount you have yet to pay back. This is great news, because it means that many dealers will apply any equity you have toward your purchase of a brand new car. You’ll then have less to finance and pay back on your new vehicle.
If You Have Negative Equity
If you have negative equity on your vehicle, that means the amount that you still owe from your auto loans is higher than your car’s value. While it’s still possible to trade in your vehicle, you’ll likely need to pay the difference between the value of the car and the amount of remaining loan payments. At this point, you have a few options:
- Put the leftover equity on your new car loan: Most dealers will allow you to roll over the equity amount that you still owe on your current car into your new car loan. Although this option is pretty easy to do, it does mean that the total amount of your new loan will increase, and you may also have higher interest payments.
- Cover the difference in cash: If you have enough cash, you can simply pay the difference up front. While some drivers may not be able to afford this option, this can help keep the loan payments on your new vehicle more reasonable.
- Push back your trade-in time frame: A third option is to either wait until you paid back the loan for your current car or pay back enough that your vehicle now has positive equity.
What To Do Before Trading in a Car That You Haven’t Paid Off
If you decide to trade in a car that still has unpaid loans, we recommend performing the following steps to make this process go as smoothly as possible :
Collect the Paperwork
Before you head to the dealer, it’s a good idea to collect all the paperwork related to your current vehicle loans. This includes the:
- Loan payoff amount.
- Loan number.
- Lender’s contact details.
- Loan account information.
Other documents that you should bring are your:
- Driver’s license.
- Current vehicle registration.
- Vehicle keys.
- Proof of auto insurance.
Conduct Research on the Trade-in Value
Know what your car’s trade-in value is prior to visiting a dealer. Reputable automobile websites such as Kelley Blue Book (KBB) and Edmunds can help you evaluate the approximate trade-in value of your vehicle based on factors like manufacturer, year, mileage, and trim. This step can help ensure that you get offered a fair price from the dealer when negotiating your trade-in.
Find Out if You Have Positive or Negative Equity
Once you know the trade-in value of your current vehicle, you can determine whether you have positive or negative equity on your car. You can perform this step by comparing your vehicle’s estimated trade-in value to the payoff amount on your existing auto loan. It’s important to note that the loan payoff amount can differ from your loan balance, as the payoff amount includes both interest and fees. You can contact your lender to find out your exact loan payoff amount.
Look at Various Offers and Negotiate
Now you’re ready to begin calling up or visiting various dealers and asking for their trade-in value quotes or estimates. Take the time to compare offers from various dealers to find one that will most closely match the estimated value you discovered through your research. Remember that you can negotiate with dealers and present them with your research to help you get a better deal.
If you have positive equity, strive to trade in your vehicle for more than your loan payoff amount, as this will provide you with additional money to fund toward your next car. If you have negative equity, work to get the best possible deal so that you have less for your rollover loan amount or less to pay in cash for your new vehicle. Make sure that you comprehend all the terms of your new loan, including the total amount, contract terms, annual percentage rate, and your new monthly payment plan.
Close the Deal
Time to seal the deal and trade in your old vehicle for a brand new one. Before you leave the dealer, know whether it’s your responsibility or the dealer’s to send a check to your lender to pay for your trade-in. Regardless of who sends this check, be sure to confirm that your lender received the check within a few business days. Interested in trading in your own vehicle or discussing your selling or trading options? Whether you’re looking to trade in a car that’s already paid off or not, our team of experts is happy to chat with you. Give us a call or send us a text message at (201) 200-1100. You can also fill out our online contact form. We look forward to learning more about your vehicle situation and are always ready to help you figure out how you can cruise toward your next driving adventure.