Reading Trading In a Financed Car: How it Works – updating 2022
Life situations are constantly changing; From a new family member to a new hobby, the type of vehicle you financed three years ago may not work now. Don’t worry, as merchants are often willing to accept a trade-in that doesn’t pay off in full. That’s how it works.
Trade a car to a dealer
When you bring your vehicle to a dealer, the dealer determines the value of your trade-in. They’re going to look at it and probably start and take a lap with it.
After your car has been inspected and evaluated, you will receive an offer. Since you’re still funding your trade-in, you need enough to pay off your current loan. Hopefully you’ll get an offer big enough to cover the balance. If not, you will have to pay the rest yourself to sell the vehicle.
If you’re offered more than the repayment amount on your loan, the extra money can be used to increase the selling price of your next car and reduce the amount you need to continue financing.
If you get an offer that can cover your loan balance, the dealership will write a check that’s mailed to your auto lender to pay off the loan. The lender can then remove the lien on the trade-in title and the vehicle can be sold to the dealer. Remember: A financed car cannot be traded or sold until the lien is removed from its title.
Equity check for a financed vehicle
If you want to trade in your financed vehicle, it is an advantage to have a lot of equity. Equity is when you have less debt for the car than its present value, and equity is what you can use to lower the selling price of your next vehicle. If you owe more on your car than it’s worth, you could be in trouble. We cover both sides of the stock coin.
However, before you head to the dealership, you should first get a rough idea of the appraised value of your vehicle so you can determine where you are in your equity position.
Keep in mind that the actual cash value of your car is what a dealer will quote you for it and may not match what you see on online review sites. You should also contact your lender or use online services to check your current loan balance.
Luckily, getting an estimate of your vehicle’s trade-in value is relatively easy these days. You can use sites like NADAguides or Kelley Blue Book and put in your car’s information and get an approximate rating. Compare these estimates to the loan balance on your financed vehicle.
When you owe something fewer on the car than it’s likely to be valued for, then you’re most likely in a stock position – great! If you owe anything more than the appraised value of the vehicle, you have a negative equity position – not that big.
If your car has negative equity, the trade-in value you’re likely to receive won’t help you lower the selling price of your next vehicle, and you may not even get enough from the dealer to pay off your current loan to sell the car .
If you are in a negative equity position, also known as an upside down loan, the amount of your negative equity will determine your next move. If you don’t owe much more than your loan balance, you can simply pay that difference in cash to pay off the loan and release the lien. Or you could take a few months and work on paying off your loan to put yourself in an equity position and then trade in the financed vehicle.
Get the most out of your trade-in
Once you have an estimated value and your loan balance, you can confidently go to a dealership. However, we have some tips on how to get the most out of your trade-in:
- First, discuss the price of your next car. Before you reveal that you have a trade-in, work to agree on the selling price of your next vehicle. You should treat your next car trade-in and your next car transactions separately. Once you’ve lowered the selling price of the vehicle on a buyer’s order, disclose the trade-in and discuss that transaction separately.
- Clean your trade-in. A dirty car may not make the best impression at the appraisal. Don’t clear out all your personal belongings, however, as a perfectly clean trade-in can give the impression that you’re ready to buy nowand you could lose bargaining power as the dealer may realize you are in a hurry.
- Don’t worry too much about big repairs. The dealer can usually repair larger repairs cheaper than you. If you overspend on expensive repairs, you could end up putting more into the vehicle than you might be offered. However, minor scratches and stains in the cabin are probably worth cleaning.
- Call around. You don’t have to settle for the first trade-in offer you receive. Take the time to call a few dealerships before you go anywhere so you can see what your car has to offer in your area. This can also give you some bargaining power.
Planning ahead is a great way to approach trading a financed vehicle. A little research, beefing up your car and phoning around different dealerships can really go a long way.
If you don’t like what dealers have to offer, you can always try to sell your vehicle yourself. You may be able to get more for it, but it requires more footwork on your part.
Bad credit and trade-ins
Trade-ins, funded or not, are very common and usually helpful for borrowers with bad credit. If you’re a borrower with less than perfect credit, you probably need a down payment to get your next car loan.
However, the deposit amount does not have to be paid in cash only. An equity trade-in can allow you to cover the down payment requirement of bad credit auto lenders.
Typically, a bad credit lender will require a minimum down payment of $1,000 or 10% of the vehicle’s retail price (sometimes whichever is less). The selling price of your next car, your income and your personal situation determine how much down payment you have to put up.
Trade-ins not only help borrowers with poor credit scores get an auto loan, but they also decrease your monthly payments because they lower the amount you would need to finance your next vehicle. Because you’re lowering the amount you need to finance, you’ll also save some money on interest charges, which can pile up if you don’t have perfect credit.
Down payments and trade-ins are great resources for borrowers, and merchants are used to buyers having both. Whichever dealer you choose, they’re likely to be very adept at handling trade-ins, even those that are still funded.
Find a car dealer with bad credit
While it’s usually not that difficult to find a dealer who can handle your funded trade-in, finding a lender who can work with your bad credit is a different story. Most traditional auto lenders will reject borrowers with poorer credit ratings, but there are lenders that are able to handle many different credit situations.
If you need a dealer with bad credit, contact us Auto Loan Express. We have a network of dealers that stretches from coast to coast and we match bad credit borrowers to them for free. First, fill out our secure car loan application form.
So the article “Trading In a Financed Car: How it Works” has end. Thanks you and best regard !!!