Options on a financed car trade in
Similar to selling a car with a lien on ityou can trade in a car with a loan on it; the process just requires a few more options on a financed car trade in than if you had a clear title. First, you need to determine your payoff amount. This is how much you have left on your loan — literally how much it would cost to pay off the loan right now.
Call your lender and ask for your options on a financed car trade in amount, and consider asking for the amount in writing, just to be safe. Next, determine the value of your car. Depending on your situation, you have three options:. If your car is worth more than the payoff price, congratulations! You have positive equity, and can put that equity towards your new car. This is the best-case scenario for trading in a car with a loan.
If, however, the value is less than the payoff, you have negative equity and are upside down in the loan. That is negative equity. First, you can pay the difference options on a financed car trade in, fully paying off the loan.
Without the extra money to pay off the loan, however, you will need to roll the difference into the purchase of your next car. The important part of the transaction is the interest.
This can lead to being upside down again, starting the cycle over. If at all possible, pay off the loan and do not let it roll over. Just be sure that, if you intend to trade for a new car, have positive equity on the loan, or have the extra money to cover the difference between the trade-in price and the loan payoff amount.
A former newspaper journalist, Cole spends his free time reading, writing, playing video games, watching movies, and learning about every subject under the sun.
He lives with his wife and daughter in Idaho. Follow Cole on Twitter: Depending on your situation, you have three options: Trading in your current car and using any extra money towards a new car; Trading in your current car and paying off the difference; or Trading in your car and rolling over the loan. ColeMayer42 This post was updated March 9, It was originally published February 12,
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