Your car loan doesn’t disappear if you trade in your car. However, the trade-in value of your car becomes credit towards your loan. This credit might cover the whole balance. If it doesn’t, your dealer will roll over your loan, combining the deficit with the amount owing on your new car.
Can you trade in a brand new car you just bought?
While there’s no set time until you can finally trade in your car, it’s best to wait until you have equity. It’s possible to trade in a vehicle that’s worth less than the loan balance, but not all lenders allow this, nor do many offer the option to roll over negative equity.
Can you trade in a car with a loan?
Or, you could give yourself a few months and work to pay down your loan to get yourself in an equity position, and then trade the financed vehicle in. Once you have an estimated value and your loan balance, you can walk confidently into a dealership. However, we’ve got some tips on getting the most out of your trade-in:
Can you trade in a more expensive car?
Trading a more expensive car in for one that is more affordable can be a great decision, as long as you own the car outright. However, if you still owe substantial money on it, you could find yourself upside down in the loan, which means the excess will be rolled into your new loan.
How does trading in a car save you money?
One key benefit to trading your car in at a dealer is saving money on the sales tax. In many states, the trade-in value can be deducted from the new car’s price. Let’s use an example to illustrate the point. For simplicity, we’ll assume that you don’t have any negative equity or otherwise owe money on a car loan.
What happens when you trade in a car you owe money on?
Trading in a car you haven’t paid off takes a few extra steps — including knowing all the numbers in the deal. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
