Yes, you can trade in a car with a loan. But proceed with caution and make sure you — not the dealer — control the transaction. You have positive equity. You have negative equity. You can pay it with cash, another loan or — and this isn't recommended — rolling what you owe into a new car loan.
But first, a little background. When you trade in your car to a dealership, its value is subtracted from the price of the new car. When you trade in a car with a loan, the dealer takes over the loan and pays it off. The dealer is also supposed to handle the paperwork, such as the transfer of the title, which establishes legal ownership of the vehicle. Loan information, including payoff amount and account number. Before you go to the dealership, use a car loan calculator to estimate these numbers and see what your new monthly car payment will be.
If you plan to trade in a car you still owe money on, first contact your auto loan lender and ask for your payoff amount which could be slightly higher than your remaining balance.
Price your car. Look up the current trade-in value of your car on a pricing guide. You can use online pricing guides like Kelley Blue Book and Edmunds. Compare values. This is referred to as negative equity.
What happens next depends on several factors: Are you hoping to trade in a financed car for a lease? Are you planning to finance and purchase a new vehicle? Find out what liability… Read More. Service Schedule Service Parts. Value Your Trade. Find Your Vehicle Close. Search By Keyword Search:. Saved Vehicles Close. Share This Close. Choose How To Share: share-via-facebook share-via-twitter share-via-linkedin share-via-email share-via-sms text.
Contact Us Close. This includes your loan balance plus any interest and fees that have accrued, so it may differ slightly from your loan balance. Contact your lender to find out your payoff amount. If you have positive equity, you can use what the dealer offers you for your trade-in to pay off your existing loan and use any leftover money as a credit toward the new car purchase. Contact a few dealers to get trade-in value estimates. If you feel a dealer is offering a low-ball price, you can negotiate using the car value estimates you researched.
Getting multiple estimates can help you make sure you get the best deal for your situation. Keep negotiations for the new car purchase and your trade-in separate. Some dealers may try to mark up the price of the new car to make up for a high trade-in amount. If you have negative equity and decide to roll your current loan balance into your new loan, be sure you understand the total loan amount, annual percentage rate, loan term and your new monthly payment before agreeing to a deal.
Read the sales contract carefully — it should spell out your new loan amount, the loan term, interest rate, monthly payment and any other spoken promises made during negotiations. It should also detail how any negative equity is being handled. You can also sell your car to a private buyer, though you may need to let your lender know first. Trading in a car with negative equity could end up being an expensive move in the long run.
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