If you’re looking to upgrade your vehicle but still owe money on it, trading in might seem complicated. The good news is that trading in a financed vehicle is possible. Here’s how it works, when to trade in, and what to consider.
1. Determine Your Vehicle’s Trade-In Value
The first step is to determine your vehicle’s current trade-in value. You can get an estimate online by answering a few questions about its make, model, year, mileage, and condition. For the most accurate value, visit a dealership for an in-person appraisal and inspection.
2. Check Your Loan Balance
Contact your lender to find out how much you still owe by requesting a payout amount. Ideally, your trade-in value will cover this amount. If it does, you can move into your next vehicle more easily. If not, you may have negative equity.
3. Understand Your Negative Equity Options
If your trade-in value doesn’t cover what you owe, you still have options:
Rolling over the debt: You can add the remaining balance to your new loan. This means you’ll pay off your previous balance along with your new vehicle.
Paying the difference: If possible, you can pay the remaining balance in cash. This helps you start fresh with your new loan.
Lease-end purchase: If you’re leasing and have negative equity, you can choose to buy the vehicle at the end of the lease and manage the balance that way.
4. Consider the Best Time to Trade-In
Timing can affect your trade-in value. Vehicles that are newer, in high demand, or have lower kilometres often receive higher offers. If your loan is still early, you may want to wait to reduce what you owe. In many cases, it can take about two years to reach a break-even point on a loan with average use and no down payment.
5. Prepare Your Trade-In Vehicle
Before trading in your vehicle, clean it and take care of minor repairs or maintenance. A well-presented vehicle can lead to a better offer. Keeping service records can also help support your vehicle’s value.
Trading in a financed vehicle doesn’t have to be overwhelming. With the right steps, you can move into your next vehicle with confidence and make the most of your trade-in.
