I Owe on My Trade-In, Can I Still 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.


, - July 22, 2019

You can still trade in a car you owe money on. The keys are to know if you have negative equity or not, and what your options are. Not all lenders allow you to trade in a vehicle that’s worth less than the loan balance, so you should learn about what you can do ahead of time so you can choose the best option for your situation.

Trading in a Car with Negative Equity

If your trade-in has negative equity – meaning it's worth less than what you owe on the loan – it can cause some complications. Most car owners experience negative equity at some point.

Some lenders allow you to roll over the difference into a new loan, but we recommend avoiding this at all costs. The reason why is because you essentially end up paying on two loans at once, which is expensive and not the smartest thing to do financially.

If this is the case for you, your next step is to see if you can try and eliminate any negative equity you have in your trade-in. If you want to do this, you typically either need to wait as you pay down the balance until you have equity, or pay the difference between what you owe on the loan and the vehicle’s actual cash value (ACV) in cash at the time of the trade in.

Finding Your Trade-In’s Actual Cash Value

What’s an actual cash value? It’s how much your car is worth to a dealer, and you find this amount out by going to a dealership and having it appraised.

First, you need to know what your loan payoff amount is, and you can find this out by requesting a 10-day payoff from your lender. Once you have it, you can visit vehicle valuation sites such as NADAguides to get a rough idea for its value, and then get it appraised by a dealer. To calculate the equity, take your car’s payoff and subtract it from its ACV.

For example, let’s say your payoff amount is $9,000. If your vehicle is worth $12,000, you have $3,000 of equity that can be used as a down payment. If it’s worth $7,000, you have $2,000 of negative equity that you can pay in cash upfront or roll over into the new loan if you’re allowed to. If those aren’t options, you may have to wait until you've paid down the loan further.

CarsDirect Tip: When getting your trade-in appraised, make sure you visit at least two dealerships, with one of them a franchised dealer for your specific make. This way, you have at least two options to choose from, and can pick the best deal.

The Bottom Line

If you owe on your trade-in, you can still trade it in. However, the situation becomes more complicated if you have negative equity. Figure out if you're upside down or not, and consider all of your options carefully before deciding which one works best for you.

When you’re ready to get the trade in and car buying process started, CarsDirect is here to lead the way. We help consumers find financing by connecting them to local dealerships that work with many kinds of bad credit situations. Fill out our free and quick auto loan request form and we’ll get right to work for you!

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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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