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Can You Trade in Your Vehicle That You Still Owe Money On?

Trading in a vehicle when you still owe money on the car loan is possible, but you need to consider a few things first, such as how much you still owe on the loan and how much it will cost you in the long run.

Before you head off to the dealership, you will want to contact your current lender to find out how much the payoff amount is. From there, you will then want to determine the actual cash value (ACV) of your car. You can use Canadian Black Book or VMR Canada to estimate your vehicle's value. Of course, you should only use this number as an estimate - the condition and demand for your make and model determine the price a dealer can give you on your trade in. Once you have done this, you can better evaluate whether or not trading in your car is the best move.

Having Equity in Your Vehicle

Trade in Your Vehicle

If you made a large enough down payment on the vehicle when you bought it, it is possible that the trade in value will cover the loan balance. Depending on the amount of equity in the car, you may still need to provide a down payment for the new vehicle if the trade in value was only high enough to pay off the loan.

If you have negative equity in the car - meaning you owe more on the loan than the car is worth (known as being "upside down" or "underwater") - you have three options: Sell the car privately, pay the difference in cash, or ask the dealer if it is possible to roll the remaining balance into the new loan.

Be advised: Rolling the remaining amount of the loan balance into your new car loan may not be the best move, especially if you are dealing with a bruised credit history. The remaining amount being rolled into the new loan will be subject to the high interest rate and will make your new vehicle payment more expensive.

As an alternative, you could try to sell the car yourself. If that fails, you could hold on to your current vehicle until you have saved up enough money to cover the difference, or until you have equity in it.

The Help You Need

At Canada Auto Loan, we know how important it is to have the car that best meets your requirements. If you are ready to make a car purchase but are having trouble getting approved, we have a countrywide network of car dealers that will do everything possible to get you the car you need. Complete our secure and easy online application today and we will match you with the nearest dealer in your local area.