How to Trade In a Financed Car: Everything You Need to Know
Trading in a financed car might seem complicated, but it is a common and simple process that many people undertake every day. If you’re considering trading in your financed vehicle, understanding the steps involved and the factors that could impact your finances is essential. Here’s your guide on how to trade in a financed car and everything you need to know.
1. Assess Your Current Loan
Before making any decision, you should understand the terms of your current loan agreement. Check the outstanding balance on your auto loan, the interest rate, and the time left for repayment. You may need to call or visit your lender’s website to obtain this information.
2. Determine Your Car’s Value
You’ll need to establish your car’s value before attempting to trade it in. Several websites provide accurate estimations of your vehicle’s worth based on its age, make, model, mileage, and condition. Consulting different sources will help you get an overall idea of what dealerships will offer you as trade-in value.
3. Calculate Your Equity
Equity is the difference between your car’s value and the outstanding loan amount. If the vehicle’s value is higher than the remaining balance on your loan, you have positive equity, and this can be put towards a new vehicle purchase. However, if the value is less than your outstanding balance, you have negative equity which means rolling over the debt into a new loan.
4. Research And Choose A Dealership
Look for dealerships that offer attractive trade-in deals and incentives while considering their reputation and customer service quality. This may involve researching online reviews or asking for recommendations from friends or family members.
5. Bring Your Documents
When trading in a financed car, it’s crucial to have all necessary documents readily available. Prepare paperwork such as your car’s title (or lien release if held by a lender), registration, proof of insurance, and a payoff letter from your current lender with the loan’s remaining balance.
6. Negotiate The Trade-In Value
Negotiating with the dealership is crucial to get the best possible trade-in value for your car. Use the research you conducted on your vehicle’s value as a reference point when discussing trade-in value with the dealer.
7. Address Negative Equity
If you find yourself with negative equity on your trade-in, there are a few ways to deal with this situation:
a. Pay off the difference: If you can afford it, pay off the difference between your outstanding loan balance and the car’s trade-in value.
b. Roll over the debt: You can roll over the remaining debt into a new auto loan, but be aware that this may lead to higher monthly payments and increased interest.
c. Hold off on trading in your car: It might be in your best interest to wait until you have paid down more of your current loan or until your vehicle gains positive equity.
8. Finalize The Deal
Once negotiations are complete, review all paperwork carefully to ensure accuracy and transparency. Sign off on any necessary documents and finalize the agreement with the dealership. The dealer will then handle paying off your current loan balance, leaving you free to purchase and finance a new vehicle.
In conclusion, trading in a financed car is a process that requires thorough research and understanding of your financial situation. By following these steps and being aware of potential pitfalls, you can successfully trade in your financed vehicle for a new one with confidence.