Is it possible to trade in a car that’s still financed?
The simple answer is yes. When you take out a car loan, you are signing a legally binding contract and agree to pay back the full amount, including interests and fees. If you want to buy another car, you will still have to deal with this loan.
Ideally, you want to avoid buying a new car while you still have money owing on your previous one. What you should be doing instead is making sure that the existing loan is paid out in full before selling, or right after the sale.
A good reason for selling a financed car is knowing that you will drive away with a smaller loan, or one with a lower interest rate. But before you get to that point, there are a few things you should be doing.
Valuing your current car
Having your vehicle valued is a crucial step to take, as it will give you a clear idea of how much money you will get for it. It should give you an indication of whether you should go ahead with the sale of the vehicle. Also look online on sites like Redbook under the Research & Value Cars tab to research current pricing guides. Compare the values you have, which are the pay-off amount and the current trade-in value of your vehicle.
Discussing the sale of your financed car with your car loan financier
After you’ve decided to go through with the sale, it’s a good idea to check in with your current loan provider. They will be able to tell you if there are any early break fees or other costs associated with ending the loan before the timeframe. They may also give you sound advice on the most affordable way to get a new car and pay out your current loan as easily as possible.
Deciding whether you want to sell or trade your financed car
You can either sell your vehicle privately or take it to a dealership for a trade-in on your new car. Both options have their pros and cons and will depend on your individual circumstances.
In summary, the basic steps involved include determining how much you owe, checking to see how much your car is worth, selecting a car that you want to buy.
Selling your vehicle privately
If you decide to sell it on your own privately, you will be responsible for all repairs, advertising, and transfer paperwork. This takes time and work, but it can lead to a better sale price. If you take it to a dealership, on the other hand, you won’t have to worry about the cost of any repairs.
Whatever alternative you choose, you must evaluate your personal objectives as well as the condition of your current vehicle.
In short, assessing how much you owe, checking to determine how much your car is worth, choosing a car to buy, and calculating the payment are the basic procedures involved. It’s critical to conduct your homework before deciding to sell a financed vehicle.
Trade in Your Car When You Owe Money on It
You must act with caution because you have a debt on the car. Ensure that you and not the dealer is in charge of the transaction. Trading in a vehicle for which you still owe money can signify one of two things:
- You have positive equity, which means that the vehicle is worth more than the amount you currently owe.
- You have negative equity where the car is worth less than your loan.
It’s also crucial to figure out whether you’re in a positive of positive or negative equity situation. You want to be in a situation where you have positive equity, which means you owe less on your loan than the vehicle is worth. In which case, if you want to trade it in, you’re in a great position – provided, of course, you don’t allow the salesperson to take you for a ride. However, if you owe more than the car is worth (negative equity), you’ll have to pay the difference in price yourself, which makes things a little more complicated.
When it comes to dealing with this scenario, you have three possibilities. You can pay the dealer in cash, receive a new loan, or refinance your existing loan.
If you don’t know what you’re doing, the process can be intimidating. Many individuals are unaware that they can haggle with the dealer about the trade-in value and the price of the new vehicle. And, to afford the purchase, you’ll almost certainly need a new loan. Getting a decent deal on a new car loan entails getting a fair interest rate. Simultaneously, you should be provided a reasonable price for the car as well as a fair trade-in value.
Whether you’ve already got finance and are looking to trade it in for an upgrade, you’re looking to finance something for the first time, Berra Finance has you totally covered.
Which means that when you engage us to help you find car financing, you gain immediate access to a large range of financing options, ensuring you’re matched with a package that meets every one of your requirements.
Got a question for us about car financing? Get in touch with the Berra Finance team either by dropping us a message or sending us an Asset Finance Enquiry and one of our brokers will get back to you ASAP.
DISCLAIMER: The information contained in this document is general in nature and should not be relied upon as legal advice. Berra finance does not warrant the accuracy or completeness of any representations made in the document or that the material is suitable for any purpose. You are responsible for assessing the material and seeking your own legal or financial advice. To the fullest extent permitted by law, Berra finance excludes all liability for loss or damage (including indirect or consequential loss or damage) which may be incurred in connection with your use of or reliance on the material contained in this document.