Can I Trade In A Vehicle That Isn't Paid Off In Burlington?

Can I Trade In A Vehicle That Isn't Paid Off In Burlington?

Posted on January 18, 2021

Trading in is a key way to reduce the amount you borrow with a car loan. It can work alongside a down payment to reduce the loan or be used in place of that down payment. Either way, trading in your old car is a key way to afford a new one. So, what happens if you want to trade in a car in Burlington that isn't paid off yet?

You can do it. But you have to do it carefully.

Trading in a vehicle that isn't paid off

There are a couple of things you need to do before selling or trading in a car that has outstanding finance.

You need to:

Find out how much of your car loan is still outstanding – Your lender should be able to tell you or you can work it out yourself.

Find out how much your car is worth – Next you need to assess the market value of your car to ensure you’ll have money left over once the original loan has been settled.

Make sure you’re not upside down – The findings of the previous two steps will tell you if you’re upside down on your car loan or not. That means owing more than the car is worth. If you are, you will need to add cash to settle the whole amount of the loan. If you’re not, you can put the equity in the car towards the new one.

Positive and negative equity

Going upside down is also known as negative equity. That’s when the value of the car is less than the amount of loan you have outstanding.

If you have negative equity, you can still trade in your car but you will have to pay the balance yourself as part of the transaction.

Positive equity is when the loan is less than the trade in value of the car. You have money left over after settling the loan to put towards a new car.

Once you know the outstanding loan amount, the trade in value of the car and whether you’re upside down or not, you can look at another car and/or car loan.

Timing is everything

If you plan to trade in a car that isn't paid off, you will need to notify your original lender of your intentions to trade in and settle the loan. If you work with a dealership, we can assist with that as part of the transaction but it always pays to tell your lender ahead of time.

You can do that when you request a settlement figure for the original loan or whenever you like.

Then, once you find a new car and want a new car loan, you sell the car, pay off the original loan, use any equity towards the new car loan and buy your new car.

It can all happen at once and isn’t as painful as it might sound. Especially if you work with us as we can take care of a lot of this for you!

For those of you who know that you have a challenging credit situation, please visit Unique Chrysler where we have a team of credit specialists ready to help you get approved for a car loan today!

For any questions, concerns, or inquiries. Please don’t hesitate to contact us here!

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