How To Trade In Your Financed Car

So, you are in a kind of fix with your car. It’s not been long since you got your old car, it is still in finance. But you need to trade it in. Can you even do that? Are there any special processes for that? You may also want to buy a new car. Then you need to trade in the old one. But you are still paying for the old one. There are some factors to think of. But you can actually trade in a financed car.

For trading in a financed car, you will need to pay your old car loan fully. Here we will help you go over the options for this. Then you can find the perfect solution.

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A few things to know about trading in financed cars

Trading in a financed car means you still owe some money on it. However, when you trade it, the dealer will take over the remaining payment. They will also handle the process of transferring the title.

When you trade in your financed car, it may happen that its value will be higher than the amount still left for you to repay. Then you will have positive equity. In this case, this value will help to bring down the price of the car you want to buy next.

But, you may have negative equity. Here your car is not worth as much as you owe. Then the dealer will still pay off your original loan. But you will need to pay them the extra amount in cash. If this is not possible, they will offer to roll the extra amount into the loan for your new car.

So here are some points to note while you trade in a financed car:

• The trade-in value of your car: You can determine this value using some websites, or you can directly talk to the dealers. If you are calculating with websites, you will get a value range. So there will be room for negotiation with the dealer.
• How much you owe: To know this, log into your online account with your lender. Then you can find out how much you still owe to them. You can then compare this with the trade-in value of your car. You will need to see the payoff amount. This includes interest that has been added since your last payment.
• Your budget: Now you have calculated whether you have positive or negative equity. So, you should think about how much you can actually spend on your new car. If possible, avoid the situation where you roll negative equity into your new loan. This can actually put you into more debt. Also, consider the interest rate and monthly payment on the new car loan. This will show you whether they fit in your budget.
• Your loan options: You will have some options when financing a car purchase. First, you can allow the dealer to take care of it. They will submit your credit application to multiple lenders and give you some options. But remember that the dealers may take a cut when arranging the financing. This can increase your interest rate. You can also get direct financing by contacting lenders by yourself. For this, you will need to do some more work. But it can also save some money.

Remember that you can normally get a better price by selling your car. You can do this in a private-party transaction. But this can be a long process. Trading in is a more convenient and safer option.

How can I trade in a car under finance?

There are many ways to trade in a financed car. But here are some helpful steps that can maximize your savings –

• Be ready to bargain: We have already noted that there is no set price for every model. Instead of that, you will get a range of values for your car. This will be based on the condition of your car. Other factors like mileage and the age of the car can be considered. But if you know the price range from beforehand can help you bargain with the dealer for a good price. You can always explore more dealers if the first one you approach is not willing to bargain. Shopping around for your new car can help you make the best of your trade-in.
• Get your car prepared: Before you trade in your car, take some time out to bring it to the best condition possible. Clean it up and make minor repairs as needed. You do not have to get much detailing done, but it can help if you have time or materials. Taking care of smaller repairs can also help. This way, the dealer will not have to do it themselves. They will likely knock off more cash than you would pay for the repairs.
• Gather all papers needed: Get your car’s 10-day payoff letter from your lender. Normally you can find this online. Or you can also call customer service to get it. You will also need to bring proof of your registration and insurance. You should also carry proof of any recent maintenance and repairs.
• Use your equity: If you owe less than the car’s trade-in price, you can use that as your down payment for the new car. You can also request for the difference in cash. Then you can use this money however you want. But if a lower monthly payment is better for your budget, you can use it to reduce the cost of the new car.
• Wait on your purchase: If you owe more than the price of your old car, then you can wait before buying a new car till you pay off your original loan. Rolling the difference into the new loan could put more pressure on you.
• Get written confirmation: The dealer will normally take care of the process of paying off your old loan when you trade in your financed car. But you should let your lender know. Make sure you get the confirmation written down that your loan is paid off, both from your dealer and lender.