How to Trade in Your Old Car When You Still Owe Money on it

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - December 26, 2018

When you still owe money on a car, it doesn't have to stop you from trading it in for a newer vehicle. It does, however, mean you have to pay off your current loan before taking out a loan for your new car.

It all Comes Down to Your Equity Position

When you're ready to finance another vehicle you can either trade in your current one to a dealer or sell it privately. Whichever option you choose, the loan needs to be paid off before you can transfer the title to another person.

If you owe less on your loan than the value of your car, you have equity – and any money above the loan payoff amount can be pocketed or used toward a down payment on another vehicle. However, if you owe more on your loan than the car is worth, you're said to be upside down, or underwater, in the loan. This is negative equity. When this happens, you still have to pay off the loan, but you also have to come up with the cash to cover the negative equity.

Depending on the amount of negative equity, this may not always be possible. Sometimes, you may have the option to "roll over" your negative equity. This means the new lender pays off your old auto loan, and the remaining loan balance is added to the cost of your new loan. This can seem like a life saver, but you end up paying more in the long run due to interest charges you're now paying on that rolled over amount.

Knowing Where You Stand

When you bring your vehicle into a dealership for an appraisal, you should have already looked up estimated values for cars of the same make and model in a similar condition to yours. You can do this using vehicle valuation websites like NADAguides. When you know where your car should be valued, you have the knowledge to walk away from a dealer that's offering too little for your trade-in.

Another good tip is to shop around before you settle on one place to sell your trade-in. When you're getting appraisals, any offer you receive is typically good for seven days, which gives you time to make a decision. You should make sure that you visit at least three dealerships, with at least one being brand-specific.

You should also call your current lender before visiting a dealer so you know the exact payoff amount.

When it's Time for Another Vehicle

No matter if you owe money on your car or not, you can still trade it in. Just remember, when you owe money on your trade-in, you have to pay off your current loan before you can profit from the sale. If you're in need of another vehicle, but you don't know where to start due to credit struggles, let CarsDirect help.

We work with a coast-to-coast network of special finance dealerships that have lenders available to help people in all manner of credit situations. You can eliminate the stress of venturing from dealer to dealer trying to find where to go for your next car by filling out our easy, free, and no-obligation auto loan request form. Get started today!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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