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When you’re looking to get a new set of wheels, you may be anxious to get rid of your old car — even if you still owe money on it.
But trade in a car with a loan could cost you if you have negative fairness, meaning you owe more on your loan than your car is worth. Let ’ s take a spirit at your likely options — whether you have positivist or negative equity — and how to trade in a cable car with a lend balance .
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Can I trade in my car if it’s not paid off?
In general, you can trade in your car for a new one even if you ’ re still making payments on it. But first it helps to know how a lot fairness you have in the vehicle. That ’ s the difference between your car ’ s current respect and the come you owe on the loan. Depending on those two factors, you have either positive or negative equity .
Positive equity
If your car is worth more than you owe, you have positive equity. As the name implies, cocksure equity is a good thing. When you trade in your vehicle, the principal may apply any fairness you have toward the leverage of the raw vehicle. This reduces the amount you need to finance .
Negative equity
If you owe more on the loanword than your car is deserving, you have negative fairness — and you ’ re not alone .
Looking at new-car sales with vehicle trade-ins in April 2020, 44 % were negative equity trade-ins, according to Edmunds data — with an average of $ 5,571 remaining on the lend. If your vehicle has negative fairness and you want to trade it in, you ’ ll need to decide which is your best option .
- Roll the negative equity into your new car loan. While this option may be convenient, it increases your new loan amount, which means you could pay more in interest over the life of the loan. And going this route typically means borrowing more than your new car is worth, which puts you at greater risk of becoming upside down again.
- Pay the difference between the trade-in value and your remaining balance. If you have the cash on hand, you can pay the difference between what you owe on your current loan and what the dealer is offering you for your trade-in. This can help keep your new loan amount lower.
- Delay the trade-in. You might also wait to trade in your car until you pay off your car loan or — at the least — are no longer upside down.
How soon can you trade in a financed car?
You can trade in a finance car any time, but you may want to wait a year or more — particularly if you bought a new cable 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 lento in the pursuit years. Depending on the size of the toss off payment you made on your loan and how cursorily your cable car has lost value, you may find that you have negative fairness in the vehicle about immediately .
How do you trade in a car with a loan?
It pays to get a full trade-in rate — the higher the total, the more you can potentially use toward your raw car leverage. here are some steps to take.
1. Research the value of your trade-in vehicle
Knowing your cable car ’ south estimated fair market measure can help you get a sense of what a principal might offer on your trade-in and give you some negotiating baron. Websites such as Kelley Blue Book and Edmunds have tools that can help you estimate your car ’ s trade-in value based on information including the class, make and model of your cable car, and the number of miles on its odometer .
To get a better sense of whether you have positive or damaging equity, you should compare your cable car ’ sulfur estimated trade-in value to your loanword wages sum. 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 principal offers you for your trade-in to pay off your existing loanword and use any leftover money as a credit toward the new car purchase. But if you have negative fairness, you ’ ll need to decide whether to postpone your trade-in, pay down your existing lend or roll your lend remainder into the new car loan .
trade in your car ?
See My Car’s Estimated Value Now
2. Compare trade-in offers and negotiate
Contact a few dealers to get trade-in value estimates. If you feel a dealer is offering a low-ball price, you can negotiate using the car value estimates you researched. Getting multiple estimates can help you make certain you get the best deal for your situation .
Keep negotiations for the new cable car buy and your trade-in separate. Some dealers may try to mark up the price of the new car to make up for a high trade-in amount. If you have negative equity and decide to roll your current lend balance into your modern loanword, be certain you understand the sum lend sum, annual percentage rate, lend term and your fresh monthly payment before agreeing to a deal .
3. Close the deal
once you ’ ve agreed on a value for your trade-in vehicle and the newly car ’ s price, it ’ s meter to close the deal. Read the sales contract carefully — it should spell out your new lend total, the lend term, concern rate, monthly requital and any other talk promises made during negotiations. It should besides detail how any negative equity is being handled. Some dealers may advertise that they ’ ll pay off your car loan — no matter what you owe on it — and rather merely fold the negative fairness into your new lend .
Alternative to a trade-in
trade in your car at the franchise international relations and security network ’ t your only option. You can besides sell your car to a private buyer, though you may need to let your lender know first. While it may take longer, you ’ ll likely get more money for your car in a individual sale than with a trader trade-in, which could help offset any negative fairness .
What’s next?
Understanding your car ’ sulfur estimated value and how much you owe on it are crucial inaugural steps in trading in a car with a lend. trading in a car with negative equity could end up being an expensive affect in the long campaign.
Read more: How to Make Friendship Bracelets
If you can ’ t afford to finance the car you want because you need to roll over some minus equity, consider trading in your current car for a less-expensive one. While you ’ ll even need to carry over the negative equity from your current car lend, your sum loanword amount will be lower — and you may pay less in sum concern on the loanword .
trading in your car ?
See My Car’s Estimated Value Now
About the author: Kim Porter is a writer and editor who has written for AARP the Magazine, Credit Karma, Reviewed.com, U.S. News & World Report, and more. Her favorite topics include maximizing credit card rewards and budgeting. Wh… Kim Porter is a writer and editor who has written for AARP the Magazine, Credit Karma, Reviewed.com, U.S. News & World Report, and more. Her darling topics include maximizing credit card rewards and budget. Wh… Read more.
