Trading in a car that is not paid off isn’t as hard as you think these days. When you trade your car in what essentially happens is that you use the value of this car as a down payment on a new car. So if you haven’t paid your car off you can trade it in and get help from a dealership to pay it off. Once you’ve trade your car in, the dealership deals with your bank or financial institution to pay the loan off for you.
Once the dealership takes possession of the car and pays the loan off for you, the dealership gets the title. The car then becomes theirs to sell.
What then happens is that you end up paying the amount owed as you pay your new car off.
Tips for trading in a car that is not paid off:
Keep in mind that when you trade your car in, you’re actually selling the car to a dealership for an amount they offer. If your car is not paid off, the dealer will deduct your outstanding balance from the car’s value to determine the equity.
Negative equity is when you owe more on your car than it is worth. Dealers will typically work equity into the financing agreement.
It’s important to research the value of your car first. Make sure that you compare the outstanding balance with the value of your car to determine the amount of equity you have before approaching the dealer.
When trading in a car that is not paid off, you need to understand how your new payment structure will work. You should have a clear understanding. If not, ask the dealership to explain the process thoroughly to you.