I Want To Trade In My Financed Car – If you’re looking for a new car but still owe money on your current car, you may be wondering how to trade in your defaulted car. An important factor is whether your car is worth more than the outstanding debt on your loan. Here’s what you need to know.
If you’re planning to trade in your car, it’s important to know how much it’s worth before you go to the dealership. Without this information, you may accept a low offer from the seller without realizing it.
I Want To Trade In My Financed Car
You can research your car’s value online using Kelley Blue Book or other valuation guides. It is a good idea to consult several of these guides, as they calculate the value differently and often arrive at different figures.
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Remember that you almost never get as much out of a trade-in as you would if you sold the car privately. But knowing what your car is worth can prevent you from being taken advantage of.
If your car is worth more than you owe on the loan, you are in a relatively easy situation. For example, let’s say the dealer offers $13,000 for your car and you still owe $11,000 on the loan. When you trade in your car, you will receive the difference ($2000), which represents your equity in the car.
If you finance your new car, you can use the equity in the old car to pay. This can be a way to reduce the overall cost of your new loan. You can add more money if you want to make a bigger down payment and borrow even less. If you pay cash for the car, the seller can deduct your trade-in from the total price you pay.
If you owe more on your current loan than you can get by switching, you are in negative equity territory. This is often the case if you are trying to trade in a relatively new car, as cars depreciate quickly in the first few years of ownership. After you have owned your car for a period, the depreciation will decrease and the loan payments will increase gradually. So if you have negative equity in your car, consider waiting to tear it down until your outstanding loan balance no longer exceeds the value of your car.
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Otherwise, you must make up the difference. Your dealer may offer to roll this amount into your new loan, but be careful. Doing so would mean starting your new loan with even more negative equity. So you may end up in the same situation in a few years when you go to trade in that car.
It is possible to trade in a car you are currently leasing, and it works in the same way as trading in a car with an outstanding loan balance. First, you need to contact the leasing company or check your lease statement to see what the down payment or purchase price of the car is. This is the amount you would have to pay if you wanted to buy the car just before the end of the lease. You will also want to know if there is an early termination fee for your lease.
Once you have this information, you can contact the dealer where you buy your new car and have them work directly with the rental company. Because there is often an early termination fee or other fees included in the lease payment, you may not receive the full trade-in value of the leased vehicle. So, as with trading in a car with negative equity, it may make sense to wait until the lease is up and exercise the option to buy.
At this point, of course, you don’t have to buy the car, but you can just return it and go. And unless you plan to drive that car for a while before selling it—or the car dealer is willing to pay more than the price to buy the option—this may be a smarter move from a financial perspective.
How To Trade In A Car
If the car’s trade-in value is greater than your current loan balance, you’re good to go—you can simply pay off your old loan and apply the difference to the cost of your new vehicle. But if you owe more on the car than its trade-in value, you’ll have to make up the difference. In this case, it may be a better financial decision to wait until you pay off the loan a little more.
Requires authors to use primary sources to support their work. This includes white papers, government data, original reports and interviews with industry experts. We also refer to original research from other reputable publishers where appropriate. You can learn more about the standards we follow to create accurate and objective content in our editorial guidelines. 2021 With her writing, Rebecca aims to bring clarity and accessibility to the auto loan industry as new and used vehicle financing costs continue to rise due to strong inflation. Contact Rebecca Betterton on Twitter Twitter Contact Rebecca Betterton on LinkedIn Linkedin Contact Rebecca Betterton on Email Email Rebecca Betterton
Edited by Rhis Subitch Edited by Rhis SubitchArrow Right Editor, Personal Loans, Car Loans & Debt Rhis Subitch is an editor who leads an editorial team dedicated to developing educational content about credit products for all areas of life. Connect with Rhys Subitch on LinkedIn Linkedin Contact Rhys Subitch via email Rhys Subitch’s email
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How To Trade In A Financed Car: Everything You Need To Know
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