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How to Trade in a Car You Haven’t Paid Off: Tips from Experts

Learn how to trade in a car that’s not paid off when buying a new car. If you haven’t completely paid your loan, we offer advice and tips on how to go about it.

We’ll also provide a checklist and tips to help you get the best deal on your trade.

Things to Consider When You Still Owe Money on A Car

The first thing you’ll need to do is determine how much you still owe on your current auto loan. It’s best to check with whoever is financing your loan to get the exact payoff amount.

It could be different from what you see on your most recent statement due to interest calculations or possible prepayment penalties and other factors. Next, understand that if you owe more on the vehicle than it is currently worth, the dealer will likely shift that amount into the payments of your new vehicle.

As an example, if you owe $15,000 on the car but it is worth only $12,000, that $3,000 difference will be added into the financing for the purchase of your new car.

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“What you owe on your trade vs. what it is worth are two different things,” said Charles Cannon, general sales manager at a BMW dealership in Texas. “A lot of times, clients want what they owe on their vehicle.”

But that might not match the vehicle’s actual value, Cannon said.

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When Should You Wait to Trade

Generally, trading in a vehicle does not fetch as much value as selling your car outright. So if you can contain your desire for a new car for a few more months or a year or two, the added equity can be beneficial.

Related Stories: How to Sell a Car

When you owe more on your car than your vehicle is worth — or have negative equity —  wait until you pay off more of the loan before trading in your car.

Or if you’re able to sell your car yourself and get closer to the amount of your payoff, you might make out even better. But keep in mind that selling a car can be somewhat lengthy and involves advertising it, showing it to people you might not know and haggling with your buyer to reach a price that both parties can live with.

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Trading for a More Expensive Car vs. A Less Expensive Car

Trading your car for a more expensive vehicle than the one you currently own (and still owe on), just increases your debt.

Adding your current negative equity on your trade-in to your new purchase may seem like a good idea, but it’s not. That is, unless you’re buying a cheaper car. When you trade in your existing car for a cheaper one, you’ll come out ahead in your own personal finances.

How Soon Can You Trade in a Financed Car

This again depends on how much negative equity you are willing to add on to the debt of your new car purchase.

Experts advise paying off more of your current loan before trading in for something new.

However, if you want to trade in a car that you still owe money on, dealers can let you know the bottom line of any new deal.

Use our tool to find out how much your car is worth today and you can also get offers from our Instant Cash Offer.

How to Calculate the Cost of Trading a Car with a Loan Balance

Having positive equity on your current loan, that is, you owe less than the car is worth, makes it easier to trade in than when you have negative equity.

“If the value of the car is more than what you owe, the dealership will accept the trade-in and take on the debt owed for the car knowing that they can still sell it for a profit,” said Jake McKenzie, an analyst with Auto Accessories Garage.

But if you owe more than the car is worth, “a dealership may still allow a trade-in, but what you owe on the vehicle will be tacked on to the price of your new car and effectively transferred to the new loan,” McKenzie said.

How to Find the Value of Your Car

To get the value of your vehicle, you can easily enter some information about your vehicle and instantly receive an accurate assessment of your car’s value using our valuation tool.

The site uses data from a range of sources such as consumer information, depreciation costs and dealer transactions, to give you a snapshot of your car’s value.

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Calculating Money Owed and Trade

First, you’ll need to find out exactly how much you owe on your current vehicle. Check with your lender to get the most accurate figure. Then, using a car valuation tool such as the one on Autotrader, determine your car’s worth.

How to Trade in a Financed Car

  • Determine how much you owe. Find out how much you still owe on your current car by consulting your lender and asking for the payoff amount.
  • Check to see how much your car is worth, using the valuation tool (as mentioned above) on Autotrader. You can also solicit cash offers from dealers using the Instant Cash Offer tool.
  • Select a car. Pick out the new car you want to buy.
  • Calculate payment. If you owe more on your current car than it is worth, expect to have that difference added to the loan amount of your new purchase.

Can You Trade in a Car with a Salvage Title?

A salvage title on a vehicle indicates that it has sustained significant damage and has been deemed a total loss by an insurer.

Dealers might sometimes accept trade-ins with a salvage title, but in many cases they won’t because they can’t resell it for profit.

Can you Trade In Your Car for a Lease?

You can, and in some cases you might find a very affordable lease.

You can use the proceeds from your trade-in to make the lease downpayment, which can lower your amount due at signing or your monthly payments.

Can you Trade in a Car You Just Bought?

Yes, but keep in mind that if you still owe a great deal on the loan (which is likely if you recently bought the car), that negative equity will transfer over to your new purchase, making it more expensive. 

Car Finance and Trade-In Related Articles:

Editor’s Note: This article has been updated for accuracy since it was originally published.


Can You Trade in a Car That's Not Paid Off?

Yes, you can. You may have to go through a few extra steps to trade it, but it is possible.

What is the Trade in Value of My Car?

The value of a trade-in car can be based on many factors, including the car’s make, model, and mileage.

When Can You Trade in a Car?

You can trade-in your vehicle whenever you desire. However, it is better to wait until you have paid off the car to do so.

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