Can you trade in a vehicle that you're still paying for?

silverbell23

I was offered a discount on a new truck if I financed a portion of it, which I did. Do I have to pay it off before I can trade it in? I was pressured into buying something that I did not want and in order to correct the situation my plan is to trade it in for a vehicle that I DO want, at a different dealership.

Mr_Shiftright

Well someone has to pay it off, so if not you, then the dealer gives you trade-in value (not what you owe, obviously), and then takes the remainder and rolls it into your new loan. So if you owe $20K and the dealer gives you $15K in trade, then the other $5K gets added to your new loan---which means that you'll be upside down in the new vehicle just about forever.

So what's happening is that you are still paying off the old car, but doing it in the new car loan.

It's not a really sound financial decision, unless you have enough equity in the vehicle you're trading in. If you owe $20K and the trade-in value is $20K, well then sure, no problem. That just makes everything convenient for you.

In order to not have to roll your negative equity into your new loan, you might be able to sell your vehicle privately for more money and come out a lot better. In that case, the new buyer pays off the loan to the financing institution and he gets the title.

kyfdx

silverbell23 said:

I owe $7,000 and it is worth about $23,000 traded in.

Well sure.. you can trade it for anything you want. Of course, your proceeds from the trade-in will be reduced by the loan payoff. So, you'll have $16K to put towards the next car.

This is a normal transaction.

kyfdx

How much do you owe, and how much is it worth?

silverbell23

I owe $7,000 and it is worth about $23,000 traded in.

PF_Flyer

And what are you planning to buy and what does it cost?

silverbell23

Perfect, thanks!