Say you're interested in getting a new car, but you still haven't paid off your old one. This is a common problem. Can you trade in your old car if you still owe on it? And if so, how can you do it? We have some answers to help you understand how it's done.
Yes You Can
In a word: yes. You can trade in your old car even if you're still making payments. In fact, dealerships do this all the time for customers. It's so common that you shouldn't even expect a dealership to bat an eyelash when you announce that you still owe money on your current car. You certainly don't need to go to the trouble of paying off your car loan and waiting for the title to come before you go shopping for a new model. Find a new car for sale near you
How to Do It
So how does a dealer do it? Simple: Once you've traded in your car, the dealership deals with your bank or financial institution in order to pay off the loan for you. The result is that you usually won't even have to bother calling your bank to inform them you're selling your car; instead, the dealership will do all the legwork.
Once the dealership takes possession of the car and deals with your lending institution, the dealership gets the title. The car then becomes theirs to sell, whether to a retail buyer or -- more likely -- at a wholesale auction to another dealer.
Don't Forget
Just because you're trading in your used car doesn't mean you no longer owe any money on it. While you certainly don't have to continue making payments on a car you no longer own, drivers who are underwater on a vehicle will find that the dealership has rolled over their negative equity into the new car's payment. Find a used car for sale near you
For instance, if you owe $10,000 on your old car but it's only worth $8,000, the dealer will add the extra $2,000 you owe to the purchase price of the car you're buying. That money doesn't simply vanish; instead, you'll end up paying it as you pay off your new car.
Car Finance and Trade-In Related Articles:
- Selling a Car: Trade It In or Sell It Yourself?
- Why Is Trade-In Value Lower Than Retail Value?
- Should You Sell Your Car Yourself or Accept Kelley Blue Book Instant Cash Offer
Editor’s Note: This article has been updated for accuracy since it was originally published.