How Does Trading in a Car Work?

It may seem that it’s unlikely to trade in your car when you’re not done paying for it. Still, it can be done, at least as long as you know the steps. While you can trade in a car with a loan, you need to be extra careful so you don’t do something wrong. So, how does trading in a car work?

Read to find out everything you need to know about trading in a car.

Reasons to Consider Trading in Your Car

Why would one trade in a car? This is a common question that pops up in anyone’s mind when they first hear about the process of trading in a car.

Even though it may seem very difficult to trade your car in after having it for a while, you will still have to get a replacement at one point when the old one doesn’t fulfill your needs anymore. Trading it in might make it easier for you to transition to your new vehicle.

Here is why you may want to trade in your car:

It Lets You Do the Transaction in One Place

What makes it so great to trade in your car sometimes is that you can simply complete the transaction in one place. All you have to do is go to the location and then go back home. You can go to the dealership, secure a new loan after finding a new car, and then trade in your old car. It’s easy and you don’t have to go to several places in a single day to finish the process.

You Can Do It Easily and Quickly

Basically, you just have to go to the dealership if you want to trade in your car. Once you tell the salesperson that you intend to trade your old car in, they will take care of everything and ensure you have an easy and smooth process that won’t take long. You’ll receive an offer after a test drive, and if you accept the offer, the money will go towards the car you’re planning to buy. So, all you have to do once you accept the deal is sign the title of the car.

This process is much faster compared to selling your car yourself.

The Dealer Handles Everything

Forget all the worries regarding paperwork and anything that has to be done to trade in your car. Even if selling your car is something that requires a lot of papers, the dealer will make things much easier. As long as you trade in your vehicle at a dealership, you can rest assured they will be the ones handling the paperwork, especially since they know better what type of documents are necessary.

Your only requirement is signing the papers. Just bear in mind that to have them take care of the paperwork, you will have to pay a document fee.

They’ll Take Care of Your Loan

If you still have to pay off your car at the time you trade it in, the dealers will pay off your loan so you don’t have to worry about it anymore. Also, in case you have some positive equity in your car, it can be used as a down payment for your new purchase or lease. But even negative equity will let you trade your vehicle into a dealership.

It Lets You Save on Sales Tax

Another good reason to trade in your car is that it lets you save on sales tax. Since the sales tax is a problem in many states, you can save on it by using this method.

Reasons Why You Might Not Want to Trade in Your Car

Even though there are so many advantages, you also have to consider the downsides of trading in your vehicle. Here are some disadvantages it comes with:

It Can Be Confusing

Usually, when you get a car deal, it contains the car’s price, the terms of the auto lease or loan, and the trade-in allowance. But many times, salespeople will combine all of these into one and it will make it very confusing.

It Can Be Problematic If You Have Negative Equity

You may owe more on the car than it’s worth. This means that you have negative equity, in which case it doesn’t make a lot of sense to trade in your vehicle with a dealer. You are very limited with a tighter budget, and it will also make it harder for you to handle paying for two cars while only being able to drive one.

You Get a Lower Price

Trading in your car at a dealer will usually give you the car’s wholesale value, which is often smaller than the price you’d get from private selling. So, this isn’t the way to go if you want to get the most money out of the old car.

How Trading In Your Car Works

Trading in your car to a dealership means that the vehicle’s value will be subtracted from the new vehicle’s price. Then, if you trade in a car that has a loan, the dealer will be the one handling the loan from that moment on and paying it off. The dealer will also do all the paperwork.

You will be able to trade in your car to a dealership if you have these items with you:

• Registration of the vehicle
• Driver’s license
• Information about your loan
• Insurance proof
• The car’s remotes and keys
• A printout of the trade-in value

Also, you can negotiate the value of the trade-in and the new car’s price as well. The best deal is when you get the right price for both of them, as well as a good interest on the new loan.

Pay-Off Amount and Trade-in Price

When you want to trade in a car that you still have to pay off, the first thing you should do is contact the auto loan lender. They will be able to tell you the payoff amount.

Then, look for the trade-in value of the car at the moment, after which you can compare values by subtracting the payoff amount from the trade-in value of the car.

Positive Equity and Trading-In

The equity you have can go towards the purchase of a new car. Basically, if you still owe $10,000 on your car and the car is worth $15,000 as a trade-in, the equity you get is $5,000. Then, on top of the equity, you can also make a down payment that will then allow you to reduce the loan balance.

Also, providing an auto loan or cash for the remaining price will be necessary. The new car’s contract will include the trade-in value. Also, you should make sure that you receive the full negotiated amount you agreed upon.

Read More

• How Long Can You Drive with a Foreign License in the U.S.?
• How Much Tax Will I Pay for a Used Car?
• How to Renew Drivers License in California
• How Soon Can You Trade in a Financed Car?
• How Many Miles Should a Used Car Have?
• How to Replace a Lost Drivers License in California
• Renting, Leasing, and Buying Cars for International Students

Conclusion

If you are tired of the old car and want to buy a new one despite still having to pay for it, you can always trade it in at a dealership. Doing this will not only help you buy a new car, but it will also make the dealer pay for the loan, so you get rid of this responsibility.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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