Can I Trade in a Car That I Still Have Monthly Payments On?


It is possible to trade in a vehicle that still has an open loan. To determine whether or not doing so benefits you financially, check your vehicle’s value and compare it to the car’s remaining pay-off amount.

If you owe more than the vehicle’s loan amount, you may have to carry over money from your old car loan into your new one.

Trade in a Car That


Vehicle’s Value

Get an idea of how much your car is worth before bringing it to a dealer for a trade-in appraisal. While Internet appraisal websites differ in value estimates, you can determine an average trade-in value for your car.

Use the Kelley Blue Book, Edmunds and NADA Guides websites to obtain a median of values. Most dealers subtract maintenance and repair fees from the trade price, so be sure to expect somewhat of a lower value if your car needs work or has body damage.


Remaining Amount

Your dealership salesperson will call your lender to find out your remaining loan amount, but you should do so beforehand to prepare your budget. If you owe more than the vehicle is worth, it is advisable to put down sufficient money to cover the negative equity so you don’t carry over the debt to a new loan.

If you lack the funds for a down payment, consider your interest rate. If your current loan has an interest rate of 6 percent and a new loan offers a 0 percent rate, you’d be saving money by transferring a small amount of the balance rather than keeping your car to pay down the loan.


Dealer Process

As stated earlier, the dealership will call your lender to obtain your remaining loan amount and appraise your vehicle. The loan amount and the vehicle’s trade value should be close to your calculations. If not, ask your salesperson why the values are off and negotiate a fair price if you do not receive sufficient explanation.

Once you make a deal, the dealership pays off the loan; equity goes into your new loan as money down, or if you owe more than the vehicle’s value, the excess amount is added to your amount due.



Be careful of transferring negative equity. In the event you carry over extra money and take out a longer term loan, you may see an attractive monthly payment, but consider the length of the loan and your total payback amount.

If your new vehicle has a sticker price of $25,000 and you end up borrowing $29,000, you can expect to stay in that car for a long time. It will take years or extra payments to level your equity and loan amount.

To see the full effect a loan term and interest rate has on your loan payback amount, use the Edmunds’ website to access the auto loan calculator feature.


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