Research The Value Of Your Trade
Knowing your cars estimated fair market value can help you get a sense of what a dealer might offer on your trade-in and give you some negotiating power. Websites such as Kelley Blue Book and Edmunds have tools that can help you estimate your cars trade-in value based on information including the year, make and model of your car, and the number of miles on its odometer.
To get a better sense of whether you have positive or negative equity, you should compare your cars estimated trade-in value to your loan payoff amount. 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. But if you have negative equity, youll need to decide whether to postpone your trade-in, pay down your existing loan or roll your loan balance into the new car loan.
How Soon Can You Trade In A Financed Car
You can trade in a financed car any time, but you may want to wait a year or more especially if you bought a new car. Cars depreciate over time. A brand-new car can decrease in value by 20% or more within the first year of ownership, then loses value more slowly in the following years. Depending on the size of the down payment you made on your loan and how quickly your car has lost value, you may find that you have negative equity in the vehicle almost immediately.
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What Happens If I Still Owe Money On The Vehicle I Want To Trade
If you still have a loan for the vehicle you plan to trade in, there are steps you should take to carefully consider whether to take on new debt for another vehicle before you have paid off your old vehicle.
These are the steps you should take:
- 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
- Research your trade-ins 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.
- 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.
If you decide to roll the balance of your existing auto loan into your new loan:
Can You Trade In A Car If Your Behind On Payments
You can trade in a car if you are behind on payments, but the process might prove difficult. Most lenders require up-to-date accounts, meaning you’ll have to pay the past-due amount. Late payments also affect your credit score, which ultimately affects your chances for a new loan and fair interest rate.
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Is It Better To Fix A Car Before Trade In
The better the condition of your old car, the better its private party sale and trade-in values, obviously. Major repair work is best left to the prosthey can do the work for less money, and they wont add the cost you paid for repairs to the trade-in value. Small fixes, however, are worth the effort.
Where Can I Trade In My Car
The casa or official manufacturer dealerships are top of mind when it comes to trading, usually you go here if you intend to purchase a brand new car from the same place. The used car will act as downpayment and a buyer covers the rest via auto loan or financing.
Your second option is used car sellers. Aside from the possibility of trading in toward another used or repossessed car, you may also opt to receive a cash payment for your old unit instead.
Here at Automart.Ph, we have our very own Sell My Car service. We sell your car while you wait and you may also use it to trade in for a high-quality used or repossessed car from our stock.
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Are There Any Risks Linked With Trading In My Car With A Loan
There are some risks associated with trading a car with a loan. Considering the risks can help you decide if trading in your car is the right decision right now:
- Taking out another car loan could stretch your budget.
- Getting into more debt could put you into negative equity. The Federal Trade Commission explains negative equity in this article.
Is It Smart To Trade In A Car With A Loan
Whether trading in a car with a loan is the right decision for you depends on your circumstances. Trading in a car with a loan might be the smartest thing if:
- Your car has high ownership costs. If your car uses a lot of gas, often needs repairs, or needs specialty parts, it can be financially savvy to trade it in. Choose a smaller car or a more modern one to save money in the long run.
- The dealership has great incentives. Dealers often have promotions that make trading in your vehicle more attractive, according to Birchwood Credit. For example, many dealers have end of financial year deals to clear old stock and make way for new models.
- You’ve done your research. If you’ve researched your options and know what you want, it’s often smarter to trade your car in rather than wait. Visit your dealer to crunch the numbers and see whether you can strike a deal you’re happy with.
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How To Trade In Your Car When You Owe Money On It
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Yes, you can trade in a car with a loan. But proceed with caution and make sure you not the dealer control the transaction.
If youre trading in a car you still owe money on, youre looking at one of these two situations:
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You have positive equity. If your car is worth more than the amount you owe on your loan, youre in good shape. This difference is called positive equity and its like having money that you can apply toward the purchase of a new car.
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You have negative equity. If your car is worth less than what you still owe, you have a negative equity car also known as being upside-down or underwater on your car loan. When trading in a car with negative equity, youll have to pay the difference between the loan balance and the trade-in value. You can pay it with cash, another loan or and this isn’t recommended rolling what you owe into a new car loan.
Well show you how to handle each of these situations. But first, a little background.
How Trading In A Car Works
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.
To trade in a car thats not paid off, bring the following items to the dealership:
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Loan information, including payoff amount and account number.
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Drivers license.
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Your vehicle keys and any remotes.
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Proof of insurance.
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A printout of your trade-in value.
Its important to keep in mind that both the price of the new car and the value of the trade-in are highly negotiable. To get an overall good deal, youll need to get a good interest rate on your new loan and a fair price for both the trade-in and the new car. 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.
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Why You Shouldnt Trade In A Car With Negative Equity
If you are interested in getting a new vehicle but have negative equity on your current loan, it is recommended that you postpone trading it in until you are no longer underwater. By rolling the loan over into a new one, you are putting yourself and your bank account at risk.
While it is likely that you will encounter dealerships that push for you to roll over your negative equity into your new vehicle, this will lead to higher interest rates and loan amounts not something you want.
Think of it like this: Drivers who choose to go ahead with a trade even with negative equity are responsible for paying both the amount left on the loan and the value of the new car. You are essentially still making payments on a car you no longer drive and increasing the chance that youll be underwater on your next vehicle.
Refinance The Car Loan
If the issue with monthly payments is affordability you may want to look at refinancing your car loan. Qualifying for a new loan with a lower interest rate could save you money and potentially reduce your monthly payment.
Its important to consider the new loan term, however. If you refinance into a longer loan term, your monthly payments may be lower. But you could still end up paying more in interest versus choosing a shorter car loan. Be sure to check the best car loan rates before going this route.
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Trading In A Car You Still Owe Money On
You can certainly trade in a car if you still owe money on it! Its extremely common for people to trade in their old vehicle to help lower the amount theyd need to finance on their next auto loan. There are a few more steps compared to trading in a car thats paid off, but its nothing to fret over.
Can I Trade In My Financed Car For A Cheaper One
It is possible, in many cases, to trade in a financed car for a cheaper one, but it really all depends on your situation. Consumers trade in cars all the time on which they still owe money. However, how difficult or easy it is to do will depend on the amount of equity you have in the car you want to trade.
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When Is The Best Time To Trade In A Car
Many people believe that you should trade in or sell your car every 2-3 years. While getting a new car might seem exciting, is trading in your current car worth it?
There are several ways to determine if its worth making a change. Start by looking at your cars trade-in value, or the dollar amount you will receive from selling your car to a dealer when buying a new one. If its high enough to give you a low monthly payment, it may be worth considering.
Another factor to consider is current maintenance costs. Does your current car need some work that might cost you a small fortune? Looking into buying a new car that doesnt need costly repairs might be a better route to take. Create a budget to learn if these repairs will fit into your monthly expenses.
Every car is different, so its important to consider your unique situation. However, there are some basic calculations that can help you decide if trading in your car is the right decision.
Should I Avoid Trading In A Car I Still Owe Money On
If you are trying to decide whether you should trade in a car you currently owe money on to finance a new one, youve got a few things to consider. Many consumers will choose to pay off their car or continue to drive their current vehicle until negative equity is no longer an issue. Others may not find negative equity to be a problem at all. Depending on your circumstance, getting into a newer or larger vehicle might be your only option. Consider the ups and downs of trading in your car. If you dont have negative equity, trading in a car you owe on to get a new one can be a great idea. Always keep the length and interest rate of your auto loan in mind when deciding what the right option is for your family.
At Autorama, we are here to help you find a car you love at a financing rate and term that you can feel good about. We understand that every customer has unique needs and we are here to serve you. For more information on the length of car loans available and things to keep in mind when selecting a term for your car loan see our previous article How Long Should You Finance a Used Car For?We are always available to answer your questions and help you get into the car of your dreams.
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Consider Holding On To Your Car If:
Your loan is fairly new. There may be penalties that make the transaction an imprudent financial decision.
Youâve got negative equity. Even if you are far along in your loan agreement, this could still be the case if your car has a low residual value. Research is key here and how much of the gap you can stand to cover depends on your personal financial situation.
Your vehicle has been in an accident. Even if your vehicle typically holds its resale value, the condition of the car when you bring it back to the dealership will determine the value of the trade-in. Every repair the dealer must make is money out of their profits, and likewise money out of your pocket.
Your loan is almost paid-off and your car has low ownership costs. This means that your monthly payments will be reduced to gas and the occasional check-up if your car is healthy and well-maintained. Unless you really need or want a new car and are in a strong financial position to do so, youll save money by getting more mileage out of your current vehicle.
Can You Return A Financed Car Back To The Dealer
The hard truth is that most auto dealers aren’t going to let you return a vehicle that you‘re financing. … You wouldn’t be returning the car to the dealer, but you can get out of the auto loan this way. If you try to sell it back to the dealership, they may not offer you enough money to cover your loan balance.
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What Happens After You Pay Off Your Car
An auto loan is an installment account, or one with a level payment every month. Once your auto loan is repaid, you could lose points on your credit score, especially if you dont have other installment accounts. Thats because a factor in your credit score is called credit mix, or types of credit accounts.
What Happens When I Trade In A Car I Still Owe On
The process of trading in your car while you still owe money on it is simple and also a very common occurrence. When you trade in any vehicle the dealership will minus the value of your current vehicle off the price of the new one you wish to purchase. By trading in your current car that you owe money on you simply add one more step to that equation.
To trade in a car you are still financing, the dealership will consider the value of your trade-in, minus the amount you owe, and subtract that amount from the price of your new car. In some cases, this might mean that you bring forward negative equity from your vehicle, meaning that you bring forward some of what you owe on your current vehicle and apply it to the loan for your new vehicle.
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