Hate That New Car? How Long Until You Can Trade it In?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - November 10, 2021

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. What do you do if you have negative equity and want to trade in your car? Keep reading to find out.

What Affects Trade-In Value?

Before you buy a new vehicle, you should know the factors that affect trade-in value. Depreciation is the biggest culprit, and, unfortunately, it can’t be stopped.

If the vehicle is new, you should ideally wait until at least year three of ownership to trade it in to a dealership, as this is when depreciation normally slows down. If it’s used, it already went through the big drop in depreciation and you can usually trade it in after a year or so.

On top of depreciation, these three other factors affect your trade-in:

  1. Mileage and condition – The rougher the shape, and the higher the mileage, the lower the car’s value generally is.
  2. Actual cash value – The vehicle’s actual cash value is the amount the car is worth. You can check its estimated worth by visiting valuation sites such as NADAguides, or, more accurately, getting the vehicle appraised by a dealer.
  3. Equity – Having equity in a car means it’s worth more than the loan balance. If it’s flipped, and the vehicle is worth less than the loan balance, you have negative equity.

Options When You’re Upside Down

It’s not the end of the world if your trade-in has negative equity. You have options, but these three may not all be available:

  1. Roll the difference over – If the lender allows this, you can roll the difference over into the new car loan. Keep in mind that doing this doesn’t eliminate the negative equity. You end up paying for the old loan and the new one together.
  2. Pay the difference – If you have the cash, you can pay off the negative equity and trade the vehicle in.
  3. Wait to trade in – If neither of those two options works in your current situation, it’s best to wait until the negative equity is eliminated.

You might also consider taking out a personal loan to cover the negative equity or selling your car privately – you could get a higher price this way, which might cover the negative equity.

The Bottom Line

If you have a vehicle you want to trade in, but worry your credit is stopping you from getting financed, let CarsDirect help. We want to match you to a dealership that has lenders available that know how to handle unique credit situations, and are ready to help. Get started today by filling out our simple and free auto loan request form.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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