How to Trade in a Financed Car

While most financial experts will tell you to wait until your old car is paid off completely before you trade it in, you can still get a good deal on a new car without having to pay excessive penalties. Just ensure that you avoid common dealer scams, and know the value of your trade-in before you drive off in that new car.

    Contact the financial institution that is handling your current car loan and find out the exact payoff amount. Being informed about the actual amount will give you an advantage at the bargaining table, especially if the dealer is unscrupulous and tries to inflate the amount of money you owe on your financed car. Remember that the actual payoff amount can fluctuate from day to day due to interest accruals.

    Obtain a copy of the Kelley Blue Book to determine the current value of your car, allowing for mileage and the overall condition. With this figure, you can determine whether you are “upside-down” on your loan, meaning that you owe more than the car is worth. If you are upside-down, you may want to postpone your decision to trade in your financed car until you have paid off more of the loan.

    Trade in a financed car for a new one from the same dealer and same financial institution. Car dealers and banks appreciate customer loyalty, and you might receive special incentives for sticking with the same people who helped you get into your current financed vehicle.

    Beware of scams that some car dealers might employ when you try to trade in a financed vehicle. Some dealers may misquote what your car is worth, while others may use a fake credit report to deny you from receiving a low interest rate. If at any time you feel uncomfortable with the deal you are getting, simply walk away.

    Prepare for the deal in advance by cleaning your financed car and having your credit report and a Kelley Blue Book quote in your hand. You can easily obtain a Kelly Blue Book quote directly from the official website, and print out the page (see Resources below).

Tips & Warnings

  • After you trade your old vehicle for a new one, always call the financial institution that provided the original loan or lease and verify that the car dealership kept its part of the bargain.

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