Trading In Your Financed Ride: Is It A Smooth Shift Or A Bumpy Road?
So, you’re eyeing that shiny new car and wondering if trading in your current ride is the best way to make it happen. But there’s a catch – you still owe money on your existing vehicle loan. Don’t worry, this doesn’t automatically slam the brakes on your dream drive! Trading in a financed car is totally doable, but understanding how it works can save you from unexpected speed bumps along the way.
First Things First: Understanding Equity
Think of equity like the value your car has earned since you bought it. It’s the difference between what your car is currently worth and the amount you still owe on your loan.
* Positive Equity: Yay! This means your car is worth more than you owe. Trading it in can be a smooth ride, as this extra value can go towards lowering the cost of your new car or even a down payment.
* Negative Equity: Uh oh, your car is worth less than what you owe on the loan. Don’t panic! While it might seem like a roadblock, there are still options. You’ll likely need to pay the difference between your car’s value and the remaining loan balance. Dealerships sometimes offer “rolling” this negative equity into your new loan, but be cautious – this increases the overall cost of your financing.
Getting Your Car Valued
Before heading to the dealership, get a realistic idea of your car’s worth. Online tools like Kelley Blue Book and Edmunds can give you an estimate based on your car’s make, model, year, mileage, and condition. Remember, this is just an estimate – dealerships will assess the actual value themselves.
Talking To Your Lender
Contact your current lender to understand your loan payoff amount. This is crucial information for negotiating a trade-in deal.
Negotiating With Dealerships
Now comes the fun part! Once you have an idea of your car’s worth and loan details, visit dealerships and compare offers. Be upfront about your financed vehicle – a good dealership will work with you to find a solution that fits your budget.
* Shop Around: Don’t settle for the first offer. Compare deals from different dealerships to get the best possible trade-in value and financing terms.
* Negotiate Aggressively: Remember, everything is negotiable! Don’t be afraid to ask for a better price on your new car or a lower interest rate on your loan.
Things To Consider
Trading in a financed car isn’t always straightforward. Here are some things to keep in mind:
* Impact On Credit Score: Closing out an auto loan can temporarily lower your credit score, but this is usually short-lived and offset by the new loan.
* Loan Term: Be aware that extending your loan term (to accommodate negative equity) will result in paying more interest over time.
The Bottom Line
Trading in a financed car can be a great way to upgrade your ride without breaking the bank, but it requires careful planning and negotiation. By understanding your equity position, researching your car’s value, and shopping around for the best deals, you can navigate this process smoothly and drive off in your dream car with confidence.
Remember, knowledge is power! The more informed you are, the better equipped you’ll be to make smart decisions and enjoy a hassle-free trade-in experience.
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