Trading in a Car That is Not Paid Off: Is it Possible?

Yes, it’s possible. If you’re considering trading in a car that is not paid off, you’re in one of two situations: the car is worth more than the amount you owe on your loan (positive equity) or the car is worth less than what’s owed (negative equity). In both cases, the car can be sold, but the outcomes are different depending on whether you have positive equity or are upside down. Read on to learn more about the steps involved in selling a car you still owe money on and how the trade-in process works.

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How to Trade-In a Car

Before you start researching the current trade-in value for your car in St. Louis, contact your lender and ask for a payoff amount. This could be somewhat higher than your remaining balance. Next, use pricing guides like Edmunds and Kelley Blue Book to get an estimate for how much your car is worth, then subtract the payoff amount from the trade-in value. This should give you an idea of whether you have positive or negative equity. When you’re ready to head to the dealership to trade in your financed car, bring the following with you:

Car keys and insurance documents
  • Account number for you loan, as well as the payoff amount
  • Valid driver’s license
  • Registration for the car
  • Insurance documentation
  • Keys and key fobs
  • Printouts of the trade-in values you researched

Important note: Trade-in values are negotiable. When trading in a used car that’s not paid off, you may not get the exact amount you expect based on the research you did prior to visiting the dealership.


How to Trade-in a Car with Positive Equity

When your car is worth more than what’s owed, you have positive equity. If you owe $6,000 on your car and its trade-in value is $8,000, you have $2,000 in positive equity that can be put toward the purchase of another car. Positive equity is deducted from the purchase price of the car. Additionally, you can make a sizeable down payment to make your monthly payments throughout the loan term more manageable. Unless you have the cash handy, you’ll need to finance the remaining balance for the car you want.

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How to Trade-in a Car with Negative Equity

You have negative equity when your car is worth less than what you owe. In this case, it’s generally best to hold off on trading in or purchasing another car. However, if you’re unable to make your car payments and want to avoid repossession, trading in your vehicle for a less expensive one can help. You’ll give the dealer your trade-in, as well as the difference between the car’s value and what’s owed. For example, if you owe $12,000 and your car is worth $10,000, the trade-in value will cover the majority, but you’ll owe the dealer $2,000 to account for the difference.

One thing to keep in mind is that a dealer may suggest rolling the negative equity into an auto loan for your next car. While this may be tempting, it’s not always the best idea because you’ll be upside down on your new loan right away, essentially putting you in the same position. Not to mention, the loan balance will be higher. If you’re unable to pay the difference, however, this may be your only option. In this case, it’s best to aim for a less expensive car, which should help make your payments more manageable, even with the negative equity from your previous car tacked on.

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How Does Rolling Over a Car Loan Work?

Trading in a vehicle that you still owe money on means you will need to roll over the old loan into the new, combining the amount you’re financing with the existing balance. In this case, you’ll essentially be paying two loans at once, instantly putting you upside down with owing more than the car is worth.

Rolling over a car loan may not be in your best interest if it’s going to make the monthly payments out of your reach. Since you’d now be paying for two cars simultaneously, it’s important to budget and ask yourself whether it’s worth the extra cost.


Find a Better Auto Financing Solution at Green Light Auto Credit!

Whether you have positive or negative equity on your current vehicle, Green Light Auto Credit can help you find a car-buying solution that meets your needs and budget. Refer to our auto financing FAQs or contact us to speak with one of our friendly representatives. We’ll show you why we’re a go-to for auto loans with competitive terms and rates for drivers around St. Charles and Florissant.

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