Can You Trade In a Car That’s on Finance?

If you’re thinking about upgrading your ride while still paying off your current car loan, this is for you. A lot of drivers in Alberta have the same question: “Can you trade in a car that’s still financed?”

You absolutely can! But there are a few important things to know so you avoid any unexpected costs, and here at House of Cars, we share all the details.

Here’s how it works:

Trading in a car that’s still under finance involves a few steps.

1. Loan Payoff Amount: First, contact your lender to find out the exact amount needed to pay off your current loan. This amount includes any remaining principal and interest.

2. Vehicle Trade-In Value: Next, get an estimate of your car’s trade-in value. You can use resources like Canadian Black Book or Kelley Blue Book to get a rough idea of what your vehicle is worth. Keep in mind that the dealership’s offer may vary based on the car’s condition, market demand, and other factors.

3. Calculate Equity or Negative Equity: The difference between your car’s trade-in value and the loan payoff amount determines whether you have equity or negative equity. If your car is worth more than what you owe, you have positive equity, which can be applied toward the purchase of a new vehicle. If you owe more than your car’s value, you have negative equity, which means you’ll need to pay the difference out of pocket or roll it into your next car loan.

Dealing with Negative Equity

Negative equity is either overlooked by buyers, they don’t understand it, don’t know about it or they know about it and just accept it. Here’s what you can do:

1. Pay the Difference: If possible, pay off the negative equity upfront. This will prevent the new loan from being inflated with the remaining balance of your old car.

2. Roll Over the Balance: Many dealerships allow you to roll over the negative equity into your new car loan. While this can make the transition smoother, it increases the loan amount on the new vehicle, which means higher monthly payments and potentially more interest paid over time.

3. Consider Refinancing: Another option is to refinance your current loan to lower your interest rate or extend the loan term. This can reduce your monthly payments, making it easier to handle negative equity, but it might not be the best option if you’re planning to trade in soon.

Choosing the Right Time to Trade In

Timing can impact your trade-in deal, especially if your car is still under finance. Here are a few tips to consider:

1. End of the Loan Term: The best time to trade in is when you’re near the end of your loan term and have built up positive equity. This will give you more negotiating power and reduce the likelihood of carrying over negative equity.

2. Seasonal Promotions: Many dealerships offer promotions, such as discounts or special financing rates, during certain times of the year. Take advantage of these deals to potentially offset any negative equity or secure a better trade-in value.

3. Market Demand: Trade in your car when demand for your specific make and model is high. This can increase the trade-in value, helping to cover any remaining loan balance.

Trading In at House of Cars

At House of Cars, our finance team will work with you to determine the best options for your financial situation, ensuring you get the most value for your trade-in. Whether you have positive equity, negative equity, or are just curious about your car’s worth, we can help.

Get Started Today!

Check out over 1000+ used cars in Alberta and start the trade-in process today.