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How Does Car Trade In Work With Loan

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The Used Car Appraisers Role

How do I trade in my car if I have an existing loan balance on it? | Mountain View Chevrolet

After the salesperson collects the information from you and your car, they will take the information and/or the vehicle to the appraiser.

Normally, it will be the used car manager that appraises all of the trades, hell go through a mental checklist, thoroughly inspecting the vehicle. His overall goal is to determine how much reconditioning costs will be and to find discrepancies to help lower the value of your trade.

More trade-in tips?

  • Do not tell the dealer you have a car you would like to trade until youve agreed on the purchase price of the vehicle you want to buy. Most dealers automatically assume youre trading a car. So stick to your guns, stay in control, and dont bring your trade into the conversation until youre ready.

  • Always look at the car buying process and the trade-in process as two separate transactions. This will make it harder for a dealer to attempt to rip you off on your trade.

  • Once youve told the dealer you have a trade. They will begin to ask you questions, trying to gather as much information as possible.

  • The salesperson will gather basic information from your vehicle such as make, model, years, mileage, etc.
  • Some salespeople may ask you to come out to your trade with them. Do not offer up information unless youre asked. Any information you provide about the history of the car may be used against you.

Alternative To A Trade

Trading in your car at the dealership isnt your only option. You can also sell your car to a private buyer, though you may need to let your lender know first. While it may take longer, youll likely get more money for your car in a private sale than with a dealer trade-in, which could help offset any negative equity.

How To Get The Most Money For A Trade

The next question people often ask about trading in their used car or truck has to do with getting the most value they can from it. While there isnt a lot that people can do to dramatically increase the trade in value, there are some small but smart things that you can do to help. Here are some basic tips:

  • Always perform the recommended manufacturer maintenance when required and have the receipts to prove it
  • Regularly wash the exterior and keep the interior of the vehicle clean
  • Repair vehicle damage

Useful Tip!

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Trading In A Car With Negative Equity

If youre upside-down on your car loan, its really better to postpone your new car purchase and trade-in until you pay off the loan or at least until you have positive equity. But if youre struggling to make car payments, trading in your vehicle can provide relief by allowing you to downsize to a less expensive car or even an inexpensive used car. In such a case, youll need to give the dealer your trade-in, plus the amount of the negative equity.

Say you owe $10,000 on a car with a trade-in value of $9,000. Instead of being on the hook for the whole $10,000, the trade-in credit will cover most of the loan and youll pay the dealer the $1,000 difference.

Beware: the dealer will often happily suggest rolling the negative equity into the loan for your next car. Though convenient, this is unwise because it will immediately make you upside-down in the new loan. It also means that youre creating a larger loan amount and paying more interest.

However, if you need a car but dont have the money to pay off the negative equity and are having trouble keeping up with your current car payments, it might be worth the risk. This can be the case if your new loan from either an independent lender or the dealer has a lower interest rate. If you decide to downsize by purchasing a cheaper car, your payments may become more manageable even if you roll the remaining debt into the new car loan.

What Does The Car Appraiser Look For

How Does Trading in a Car Work?

If hes good at what he does, he will walk around the entire car to get an overall view of the body and paint condition of the vehicle, also checking the tires for tread wear.

Hell then check the currency of your tags, inspection, registration, hell inspect the windshield and all the glass for any cracks, chips, or blemishes.

He will check the fluids, open all the doors, hood, and trunk. Hell look inside the vehicle for cleanliness, he will make sure every button and switch works. If your vehicle has a navigation system, DVD player, or CD, hell make sure they operate correctly.

Hell then scan the vehicle identification number with his smartphone and check its history with a company such as AutoCheck Vehicle History Reports to make sure the vehicles title history comes back clean.

Most of these smartphone programs will also tell the appraiser about the current used car market and some average current values on the vehicle hes appraising.

As the appraiser goes through his inspection of your car hes looking for certain red flags like paint lines, wrench marks on nuts and bolts, a sputtering engine, misaligned carpet, low fluids, etc.

If he finds one of these red flags, he will look a little deeper into the area to see if he can find anything else he can use to devalue the vehicle.

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When Youre Looking To Get A New Set Of Wheels You May Be Anxious To Get Rid Of Your Old Car Even If You Still Owe Money On It

But trading in a car with a loan could cost you if you have negative equity, meaning you owe more on your loan than your car is worth. Lets take a look at your potential options whether you have positive or negative equity and how to trade in a car with a loan balance.

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 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.

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How Does Trading In A Car Work

When you trade in your car rather than selling it, there are some trade-offs to keep in mind. The main disadvantage of a trade-in is that a dealer is unlikely to give you the car’s full value since they need to sell it for a profit. On the other hand, trading in a car instead of selling it yourself saves time, since you won’t need to advertise the car or meet with potential buyers. What’s more, when you trade in your car, you can put its value toward the purchase of your next vehicle. Learn more about trading in for a used car and trading in a new car or trading your car in for a lease.

Much of what you’ll experience with a trade-in is the same as a private party sale. You’ll need to be informed about the vehicle’s current value, prepare the vehicle for sale, and negotiate a price with the dealer.

Should I Detail My Car Before I Trade It In

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One of the easiest ways to improve the trade in value of your car is to make sure it is in optimal condition. If you get it professionally detailed so everything is deep cleaned, you can get added value from the trade in especially if your interior was very messy to begin with. You can get basic levels of detailing for less than $100 , but the extra value you get from the trade-in offer will often be worth more.

The same thing applies to fixing up the exterior of your car. Things like removing rust, touching up scratches and chips in the paint, polishing and waxing everything, and washing the tires to make it look like its in better condition will only help you get a better offer from a dealer.

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Is It Ever A Bad Idea To Trade In A Car With A Loan

There are several circumstances where it makes more sense to pay more off your car before trading it in. You might want to delay your trade-in if:

  • Your loan is fairly new. Cars depreciate as soon as they leave the dealership. Waiting until you’ve had your car a little while helps the value even out. If you wait a little, you won’t take such a financial hit.
  • You’ll get penalized. Some lenders charge prepayment penalties for paying out loans before the end of the loan period. These extra charges, spelled out in the car loan terms, help offset the interest your lender won’t get when you prepay. These penalties can be so steep it’s not worth trading in your car until the loan is repaid.

Reduce The Amount Of Your New Car Loan

Trading in an old car will decrease the cost of your new vehicle providing you dont have negative equity in the car youre trading in. This can be especially helpful if youre financing your next vehicle.

A trade-in with significant value can lower or eliminate the down payment on your next car or help to lower your monthly payments.

If youre buying your new vehicle in cash instead of financing it, a trade-in reduces the amount of money youll have to pay.

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When You Should Wait To Trade

As nice as it is to drive a new vehicle, theres times when trading in your financed vehicle could hurt you in the long run. Heres a few times you should consider waiting:

  • If your current loan is still relatively new. As soon as you drive your vehicle off the lot, it depreciates in value. Rather than getting a new set of wheels right away, wait until the cost of it evens out and your loses wont be as big a blow.
  • If youll suffer from a prepayment penalty. Lenders earn interest off you when you apply for a loan. If you pay it off early, youre taking away some of their income, often resulting in you having to pay a prepayment penalty.
  • If youve paid off your loan and can make additional money by selling your vehicle privately. Sometimes, its a better option to make a little pocket cash rather than trading-in your vehicle. If you own the car and know youll be able to sell it for a significant amount, go that route instead.

What Is A Silent Walk

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A salesperson or manager will walk around your trade-in and touch or point out every little dent, crack, worn tire, scratch, or imperfection, and not say a word. They may nod or scratch their head, looking concerned, to let you know they have found a discrepancy.

Dont worry, this is all a part of the silent walk-around. All theyre attempting to do is mentally devalue your car in front of you so think its not worth as much as it really is.

When a salesman does a silent walk around, most customers will start making up excuses right away about every little door ding. Its all a psychological game dont let them get in your head, if you start making up excuses youre letting them win.

Now that you know what theyre up to, try not to smile or laugh. Only speak if they ask you a question. Dont worry about every little thing he touches or sees, its all just an act.

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Know What Your Car Is Worth

Next, youll need to research the current value of your vehicle. With the general supply-chain issues due to the Covid-19 pandemic, the industry is experiencing a scarcity of new carswhich means the market is hot for both new and used vehicles.

You can easily find out the present value of your car by visiting a vehicle valuation site like Edmunds, Kelley Blue Book or Youll need to know the year, make, model, your zip code and overall condition of the vehicle. Vehicles less than three years old hold greater value, but even vehicles up to five years old are in demand.

The Dos And Donts Of The Trade

Youâre getting ready to buy a new or used car. The car you currently drive is in good shape and might have some value to it. Should you sell it yourself or trade it in?

If you want the most possible money for your vehicle, youâre better off selling it yourself. Potential buyers are not as well trained in car valuation as the pros, and theyâre not always trying to eke out every bit of a carâs value for resale, so youâll likely get more money. However, this process takes time, and youâll have to deal with strangers and perhaps put in more effort than many people are willing to invest. In fact, some 45% of all car purchases in 2019 included a trade-in, according to Edmunds data.

Trade-in offers are typically less than youâd get in a private-party sale because the dealership must factor in the cost to recondition the vehicle and make a profit when it resells it. The plus for car shoppers is that trading in your car can be very convenient, far more so than finding a private-party buyer. If you follow these tips, you can get the most for your car trade-in.

Trade-in offers are typically less than youâd get in a private-party sale because the dealership must factor in the cost to recondition the vehicle and make a profit when it resells it.

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Disadvantages Of Trading In A Car

Trading in a car isnt always the best option. Consider the negatives before making your decision.

1. You May Get Less Money for Your CarTheres no doubt that trading in a car to purchase a new one is simple and convenient. But too often, the amount offered by dealerships is much less than the private party value.

For example, the private party value of a 2009 Toyota Camry XLE in excellent condition with 30,000 miles is approximately $19,479. However, the trade-in value for the same car in the same condition is only $17,426 a difference of about $2,000.

2. You Limit Where You Can Buy a CarWhen a dealership appraises your car and agrees to buy your car, youre obligated to buy your next car from that dealership. If the dealership doesnt have a car that you want, you cant trade in the car. There is no provision that allows you to trade in a vehicle at one dealership and purchase from another, nor at a later time.

How To Find Out What Your Trade

How a Trade-in works with a Car Lease

If you are planning to trade your car in, then its important to know how much its worth before you go to the dealership. Without that information, you might accept a lowball offer from the dealer without realizing it.

You can research your cars value online by using the Kelley Blue Book or other valuation guides. Its a good idea to consult several such guides, because they calculate value differently and often arrive at different numbers.

Bear in mind that youll almost never get as much from a trade-in as you would if you sold the car privately. But knowing roughly how much your car is worth can keep you from being taken advantage of.

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How Soon Can You Trade In A Financed Car

You can trade in a financed car any time, but you may want to wait a year or more especially if you bought a new car. Cars depreciate over time. A brand-new car can decrease in value by 20% or more within the first year of ownership, then loses value more slowly in the following years. Depending on the size of the down payment you made on your loan and how quickly your car has lost value, you may find that you have negative equity in the vehicle almost immediately.

Whether Youll Come Out Ahead Depends On How Much You Still Owe On The Loan

If you are in the market for a new car but still owe money on your current one, then you might be wondering how to trade in a car that is not paid off. One key factor is whether the value of your car is higher than the outstanding balance on your loan. Heres what you need to know.

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Limited Options For Your New Car Purchase

A trade-in is a two-part transaction. Youre essentially selling your car to a dealer in exchange for buying a new car from them at a discounted price.

This means, you have to get your new car from whichever dealership youre trading in your old car. If that dealership doesnt have the exact car you want to purchase, you have to settle for the cars they have available.

Your other option is figuring out where you want to purchase your new car and trading in your old vehicle there, but you might have to settle for a trade-in offer thats not the best deal you could get.

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