Trading in your car is when you sell it to a dealership for credit that you can use to buy another vehicle. That credit reduces the overall cost of the new car, so trading in can be a great way to lower your monthly payments.
But what if you still owe money on your current car? Can you trade a car that is financed?
The answer is yes, but it’s a little more complicated than trading in a car you own outright. Here’s what you need to consider:
- What is the remaining balance on your loan?
- What is the market value of your car?
- What is the dealership offering you for your trade-in?
- Do you have negative equity (meaning you owe more than the car is worth)?
Let’s take a closer look at each of these factors.