Here’s What You Need to Know Before You Trade
The great advantage of trading in your car is convenience: you’re completing two major transactions at one time and in one place. Most small and large dealerships are equipped and ready for vehicle trade-ins.
When trading your car, you may expect to sell your vehicle and apply the sale amount to the purchase of your new car.
You may also expect to fill out all paperwork during the same transaction.
How To Trade in a Car with a Loan
- Contact your financial lender & request payoff information
- If you owe money on the car you’ll want to determine the “payoff amount” of the vehicle.
- In order to determine the payoff amount of your vehicle, it is advised to contact the bank/financial institution that hold the lien on your vehicle. Before calling the lienholder, you will need:
- Full name of vehicle owner (likely your name)
- Your account number
- Last 4 digits of your social
- Determine if you have positive equity or negative equity on the vehicle if you still own money on it.
- Positive equity means the value of your car is more than what you owe. If that’s the case, your sale price will be applied to your trade-in purchase.
- Negative equity means the value of your car is less than what you owe on a loan. You’ll be responsible to pay this amount before trade-in so that you are no longer “upside-down” on the loan.
- Disclose the loan status of the car you are selling
- If you do still owe money on your vehicle (having negative equity), the dealer will take over the loan.
- Agree on a sale price of your vehicle
- The sale portion of trading in your vehicle will involve the same process of determining the value of your car, receiving a quote, appraisal and inspection, leading to a final sale offer. You’ll need to balance these numbers as you consider which car new vehicle your sale will be applied to.
- Shop for your new car – Many dealerships and car buying services are well equipped to find the specific vehicle you have in mind. For larger dealerships you’ll likely have an inventory to scout. For smaller dealerships, they may be in a position to simply make a call to have your vehicle delivered to their location for purchase.
- Complete all paperwork and finalize the trade – You’ll finish all paperwork on site for both transactions, including new financing should you choose the dealer’s loan terms. Pro tip: Have a pre-approved loan certification from your own lender in place and see if the car dealer can beat those terms.