How to Trade in a Car That is Not Paid Off?

There are plenty of scenarios where Centre drivers would potentially trade in a car with payments. During a trade, the dealership that’s purchasing the car normally compensates the previous owner in value toward a new car purchase. While the trade-in process is pretty cut and dry, the situation can become overwhelming if the individual buying the car still owes money on a prior loan. If you’ve ever wondered how to trade in a car that is not paid off, continue to the section below to find out how to navigate the process. 

Positive vs. Negative Equity

When you’re learning how to trade in a car you still owe on, everything boils down to one of two scenarios: 

• You have positive equity, meaning your car is worth more than what you still owe on the loan
• You have negative equity, meaning the car is worth less than what’s owed

Determining which type of equity you have requires accurate knowledge of how much you owe the finance company for the vehicle, the value according to Kelley Blue Book, and how much you’ll receive for the trade. You’re in a negative equity situation if you’re offered less than the total owed. However, you’re in a positive situation if the total is more than the remaining balance. 

Assuming you have positive equity, you’re in the most advantageous position for a trade-in. If a Trion, GA driver is in this situation, their car will be paid off with no additional amount out of pocket, and any leftover value can go toward the purchase of the new vehicle. 

However, if you’re in a negative equity situation, it’s best you weigh your options to see what scenario ends the most positively for you. 

Negative Equity Trade

When Chattanooga, TN drivers are in a negative equity situation, how do they trade in a car with payments? Consider the following scenarios: 

• Make up the remainder you owe after the trade-in price. This is the most common situation since it can quickly turn your situation around. Not everyone will have enough cash to make this happen, but if you do, it’s the best option. 
• Transfer the remaining balance to the new loan. A lot of drivers choose this option when they’re in a negative equity scenario. However, you should be aware of the fact that this can significantly increase your monthly payments on the new car. If you can’t handle the total, paying the car off first is probably best before upgrading. 

Regardless of your choice, you must be aware of the terms before moving forward with anything. 

We’ll Help With Your Trade-In Process at Landers McLarty Ford

If you’re in a situation similar to any of the ones mentioned above, our finance department will help you navigate the confusing waters to help you emerge unscathed on the other side. We’ll help you make the right move for your credit, regardless of whether that means purchasing a car or not. Contact a member of our team today with any questions regarding the trade-in process!