How does trading in a new car work

If you're still paying off your car, you can use the money you make from your private sale to pay down your loan.

If the money you make from your private sale doesn't cover your loan balance, speak to your lender. They can transfer your car loan to a personal loan or suggest another good option for repaying your debt. Since you don't have a dealer working on your behalf, you'll have to transfer your car's title to its new owner. The transfer of ownership form is on the back of most car titles.

Selling your car that still has an outstanding loan is a viable option for some people. Do your research and see if this option is right for you. New Cars. Buyer's Guide. Type keyword s to search.

Today's Top Stories. Westend61 Getty Images. Considering the risks can help you decide if trading in your car is the right decision right now: Taking out another car loan could stretch your budget. Getting into more debt could put you into negative equity.

The Federal Trade Commission explains negative equity in this article. The following steps occur when you trade in your car with a loan: You find a new car that fits your budget. Completing this step first makes sure you have a car when you trade in your existing one. You confirm your car's trade-in price. Your car's trade-in value is your equity. It is subtracted from the cost of your new car. You bring paperwork to the dealership. NerdWallet states the dealer needs the following information to trade in your car: Your loan account number The amount owing on your loan Your driver's license Your vehicle registration Your vehicle keys and remotes Proof of your insurance A print-out of your trade-in value The dealership contacts your lender.

The dealer contacts your bank or financial institution and repays your original loan in full, as AutoTrader explained. The dealership handles the paperwork.

Your dealer transfers the title of your old car into their name and your new car into yours. List of Partners vendors. If you're looking to buy a car, you may have an existing vehicle that you'll no longer need.

One option is to trade it in at the dealer where you're buying your new car. Here's how that works and how to get the best deal.

That's the amount you'll have to pay in cash or borrow in the form of a car loan. In many states, you'll only have to pay sales tax on the net cost of the new car.

It's worth remembering that when you're buying a car, almost everything is up for negotiation, and the value of your trade-in is part of that. If you find that the dealer is giving you more money than you expected for your trade-in, that may be because they are making it up in other areas—a higher interest rate, a higher sale price, and so on.

Because of that, some experts suggest not mentioning that you're trading in a car at first. Instead, negotiate the lowest possible sale price for the new car.

Then mention that you'd like to trade in your old car and ask how much the dealer will give you for it. You will most likely need to bring it to the dealer for an inspection. If you think the dealer's offer is too low, you can always keep your existing car and sell it on your own.

There are a number of online resources you can use to determine how much your used car is worth. Bear in mind that if you are trading in a car that still has a loan on it, you'll need to pay your loan off first. Your dealer may offer to pay the loan off for you, but be careful if your old car has negative equity—that is, if it's worth less than you still owe on the loan, which may be the case if your car is relatively new.

One solution to that problem, the FTC says, is "postponing your purchase until you're in a positive equity position. For example, consider paying down your loan faster by making additional, principal-only payments.

The amount of money you'll get by trading in your car is generally less than you could get by selling it to a private party. When the dealer takes your car as a trade-in, they're planning to sell it to someone else. They can't offer you its full value, because they need to make a profit. They may also have to spend some money sprucing up the car to make it more presentable.

Selling your car by yourself is more work especially if you are still paying off a car loan , but it may be worth it if you have the time. A relatively easy way to reach potential buyers is by advertising on one of the major used car websites.

Trading in your car with the dealer makes the process much simpler, but you'll most likely get less money than if you sold it to a private party. You'll have to decide whether the convenience is worth the difference in price. See retailer for warranty details. How Does Trading in a Car Work? Trading in a car allows you to sell your current vehicle to a dealership and apply its value to your next car purchase.

This is an efficient way to approach the car-buying process. Here are all the details you need to know to trade in your car and purchase a new vehicle. If you own your vehicle, the trade-in process is quick and simple at any dealership. You will receive the full value of the car that you're trading in and can easily apply it toward a down payment on your next vehicle.

Trading in your car at a dealership has many benefits over selling it yourself. When you trade your vehicle in at the dealership: The dealership handles the paperwork, so you don't have to. You'll get an immediate offer for your vehicle, so you're not waiting to find an interested party.

You can leave your old vehicle with the dealership and drive away in a new one, so you're never without a vehicle. You'll first need to determine how much you owe on the vehicle. If you owe more than the vehicle is worth, you're considered "upside-down" on your loan.

In this case, the dealership will apply the value of the car toward the balance on your loan and roll the remainder of what you owe into the loan for your next vehicle.

This makes it possible for you to trade in your vehicle and get a new one, but it means that your trade-in actually adds to your loan rather than making it smaller. It's best to avoid this situation whenever possible and attempt to pay off enough of your loan to come out on top.

If your vehicle is worth more than what you owe on your loan, the dealership will pay off your existing loan first and apply the difference toward your next vehicle.

This is a better situation financially because that excess amount counts as a down payment toward your next vehicle and will reduce the amount that you have to borrow. Working with a dealership is a great way to trade in a vehicle that you owe money on because the dealership takes over the loan and helps you get into a new car before it's paid off, which is something you can't do with a private sale.