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Can you trade in a car that has a loan on it?
Is there any way that I can trade in a car that I have a loan on? I want to get a new car because I’m about to move somewhere that gets a lot of snow and my car is front wheel drive, but my car still has a loan on it.
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Yes, you can trade in your car that has a loan on it, but any negative equity on your current loan will roll over to your new one. If you have positive equity, simply trade in the car, pay off your own loan, and you can either pocket the difference or use it as a down payment.
To determine your equity amount, request a loan payoff letter from your lender to see how much you still owe on your loan. Then, use a tool like
Kelley Blue Book
to find the trade-in value of your car.If the trade-in amount is higher than the amount that you still owe on your loan, you have positive equity in your car. The difference between the two numbers is the amount of money that you can apply towards the purchase of a new car.
For example, if you still owe $2,000 on your loan but your car is worth $9,000 at trade-in, you’ll be able to apply that $7,000 towards a new vehicle.
If the trade-in amount is lower than the amount that you still owe on your loan, however, you have negative equity. You can either roll this amount into the new loan or pay it off out of pocket.
When you purchase a new car, make sure to update your insurance policy, too. Download the
Jerry
app and answer a few questions to see a comprehensive cross-analysis of the best policies across more than 50 providers. Jerry will even handle the phone calls, paperwork, and renewals for your new insurance policy so that you don’t have to!View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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