When Can You Trade In A Car You Still Owe Money On?

When the amount you owe on the car is less than the trade-in value, the process is pretty straightforward.

Say you still owe $5,000 on a car, and a dealer offers you $6,000 for it as a trade-in.

The dealer pays off the $5,000 loan for you, which releases the lien.

Then, you transfer ownership of the car to the dealer.

How soon can you trade in a financed car?

How long you should wait to trade in your vehicle ultimately depends on your current loan. There’s no specific time frame you need to follow, but the general rule of thumb is to wait until your car has equity before you go to trade it in.

Can you trade in a car that you still owe money on?

Yes, you can trade in a car with a loan. If you’re trading in a car you still owe money on, you’re looking at one of these two situations: You have positive equity. If your car is worth more than the amount you owe on your loan, you’re in good shape.

Is it better to pay off car before trading in?

When You Should Wait to Trade In

It’s not worth wrecking your financial future for a newer set of wheels. When you have prepayment penalties. When a lender agrees to a car loan, they are counting on earning interest off of you for a set amount of time.

Should I repair my car before trading it in?

What’s not obvious is how much work you should put into your old car before bringing it to the dealership for a trade-in appraisal. Major repairs are best left to the pros—they can do it for less money, and they won’t add the cost you paid for repairs to the trade-in value. Small fixes, however, are worth the effort.