How to Trade in a Car That is Not Paid Off

While many drivers can put their automotive investment to work when they trade an old car for a new model in Darlington and Dillon, some might be wondering how to trade in a car that’s not paid off. While this does make the process a bit more complicated, some ways can make it possible. The finance team at Nissan of Florence can help you learn how to trade in a car you still owe on. Find out how with us! 

Do You Have Positive or Negative Equity? 

This is the first question Sumter drivers need to answer before learning more about how to trade in a car that is not paid off. Let’s look at the definitions: 

• Positive Equity—Your car is worth more than what you owe on the loan. 
• Negative Equity—Your car is worth less than you owe on the loan. 

It’s easy to calculate your equity to find out which you have. First, you need an estimate of what your car is worth, which you can get from sites like Cars.com or with our trade valuation calculator. Next, check your most recent auto loan statement to find out how much you still owe on your loan. If the amount you owe on the car loan is larger than the estimated value of your car, you have negative equity. You’ll need to consider some options to see what works best with your financial situation. 

Trading in a Car with Negative Equity

Ideally, your car will be worth more than you owe when it’s time to trade it. If that’s not the case, you still have some options for paying off the old loan before taking out a loan on your next vehicle:

• Make up the difference you owe after accounting for the trade-in price. If you have the spare cash to pay off the remaining balance of your car loan, this is your best bet. Check with your lender to find out their preferred process for early payoff. 
• Transfer the amount you still owe over to a new loan. Since most people don’t have the kind of cash on hand to pay off a lump sum of an auto loan, this is the route most buyers with negative equity take. Unfortunately, this will mean higher monthly car payments on your new vehicle. 

Because it’s so difficult to come out financially better when you trade in a car that’s not paid off, we don’t recommend trading unless you’re downsizing to a vehicle that has a significantly lower monthly payment than your previous loan. 

Learn More About Automotive Finance with Nissan of Florence

We know many customers are intimidated by automotive finance. At Nissan of Florence we work hard to make the finance process as easy and transparent as possible. If you’d like to learn more about how to make the best financial decisions about your car, take a look at our car-buying tips.