Many car owners find themselves in a position where they want to upgrade their vehicle but are still making payments on their current car. This raises a common question: can you trade in a car that’s still under finance? The answer is yes, but the process can be more complicated than simply exchanging your old vehicle for a new one. In this article, we’ll explore the ins and outs of trading in a financed car and discuss how working with a finance broker can streamline the process.
Understanding Your Current Loan
Before you consider trading in your financed vehicle, it’s essential to understand the specifics of your current loan. The most important factor is the loan balance, which is the amount you still owe on the car. Here are a few key points to keep in mind:
1. Loan Balance vs. Trade-In Value
- Loan Balance: This is the total amount you owe to your lender. It may include the principal amount and any accrued interest.
- Trade-In Value: This is the amount a dealership is willing to offer you for your car. It can vary based on the car’s condition, mileage, and market demand. If your trade-in value is less than your loan balance, you will have to cover the difference, which is known as being “upside down” on your loan.
2. Payoff Amount
When trading in a financed car, it’s crucial to request a payoff amount from your lender. This amount reflects the exact figure needed to fully pay off your loan. Ensure that you have this information ready when discussing trade-in options with the dealership.
The Trade-In Process
1. Contact Your Lender
Start by contacting your lender to get the payoff amount and confirm whether there are any penalties for early repayment. Knowing these details will help you assess your options moving forward.
2. Get Your Car’s Value
Next, determine the trade-in value of your vehicle. You can use online valuation tools, but the best way is to visit local dealerships for appraisals. This will give you a realistic idea of what you can expect when trading in your car.
3. Visit Dealerships
Once you have the necessary information, visit several dealerships. Be transparent about the fact that your vehicle is under finance, and provide the dealership with the payoff amount. They will factor this into their offer.
4. Review Offers
When you receive offers from dealerships, carefully evaluate them. If the trade-in value is higher than your loan balance, the difference can be applied as a down payment on your new vehicle. If you’re upside down, you may need to negotiate with the dealer to see if they can cover the negative equity or roll it into your new loan.
The Benefits of Working with a Broker
Navigating the complexities of trading in a financed vehicle can be challenging, especially when dealing with loans and valuations. This is where a finance broker can provide invaluable support:
- Expertise in Valuation: Brokers understand the market and can help you get a fair valuation for your car, ensuring you maximize your trade-in offer.
- Negotiation Skills: Brokers can negotiate with dealerships on your behalf, helping you secure the best deal and navigate any issues related to your loan.
- Access to Multiple Lenders: If you need to roll negative equity into a new loan, brokers can help you find lenders who are willing to accommodate this, ensuring you get a financing option that works for you.
- Streamlined Process: Brokers simplify the trade-in process by handling the paperwork and liaising between you, the dealer, and the lender. This can save you time and reduce stress.
Conclusion
Yes, you can trade in a car that’s still under finance, but it requires careful planning and understanding of your loan terms. By knowing your loan balance, trade-in value, and the process involved, you can navigate the trade-in successfully.
Working with a finance broker can enhance your experience significantly. Their expertise, negotiation skills, and access to multiple lenders can help you achieve your goals, whether that’s maximizing your trade-in value or securing favorable financing for your next vehicle. With the right support, trading in your financed car can be a smooth and beneficial process, allowing you to move on to your next automotive adventure with confidence.
DISCLAIMER
The information provided on this website is general in nature only and has been prepared without considering your financial needs, circumstances and objectives and should NOT be construed as financial, taxation or legal advice. For more information, get in touch with our experienced partner brokers today.
