Can you trade in a car with a loan?

While it might seem daunting to trade in a car with a loan, understanding your options and planning accordingly can help you through this process. Whether you want to upgrade your current vehicle, lower your monthly payment or your car simply no longer suits your needs, knowing how to trade in a car with an outstanding loan is essential. In this article, we’ll guide you through trading in a financed vehicle and explore when it might be the right time to do so, depending on your financial goals.

How soon can you trade in a car when you have a loan?

Although there’s no specific time limit as to how soon you can trade in your financed car, knowing the equity you have in your current vehicle is a great place to start. The best time to trade in a car typically depends on whether or not you have positive or negative equity, which are:

  • Positive equity: If you have positive equity, the trade-in value of your car is higher than your loan balance.
  • Negative equity: If you have negative equity,the trade-in value of your car is less than your loan balance. This is also known as being “upside-down” on your loan.

Equity can influence whether you trade in your vehicle, since positive equity can be used toward the down payment on a new car. Alternatively, you would need to consolidate negative equity into a new loan or you may need to pay it off before purchasing a new car. 

How to Trade in a Financed Car

There are several factors to consider when trading in your vehicle that still has an outstanding loan, including its current market value. This can help you have an informed approach when negotiating with a dealership so you get the most out of your trade in. Here are some steps that can guide you through the process of trading in a financed vehicle:

  • Research the car’s value: Use online tools such as Kelley Blue Book, Edmunds or NADA to find out the value of your car. This will give you an idea of how much you can expect a dealership to offer you. When using these tools, be upfront about any of your vehicle’s damage or wear so you can get an accurate estimate.
  • Understand loan balance: You can contact your lender to find out exactly how much you owe on your car loan. This will help you decide if it’s the right time to trade in your vehicle. If you know how much you owe and a ballpark figure for how much your car is worth, you can also estimate whether you have positive or negative equity.
  • Negotiate with the dealership. It’s essential to negotiate your trade-in separately from purchasing your new car. The dealership may try to mark up the price of the new car if you do both deals together. This means that negotiating separately ensures you get the most value for your vehicle, regardless of how much you might still owe on it.
  • Finalize the trade-in. The dealership will handle the paperwork once you’ve negotiated your trade-in price. They’ll pay off your remaining balance with your lender and apply any positive equity toward your new car purchase.

Make Sure Your Trade-In Is Insured With the Help of SelectQuote

Trading in a car with a loan can seem confusing but finding coverage for your new car doesn’t have to be. SelectQuote will compare rates from many of the nation’s most trusted carriers all in one place, making it easy for you to understand and review your options. Our licensed agents will shop for a car insurance plan that’s right for your budget and financial goals so you can feel confident in your coverage. 

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