Many people keep their vehicles until the metaphorical wheels fall off. However, there’s also a decent bit of the car-buying public that elects to trade in their car when they want something new. The problem is that they sometimes want a new vehicle while still paying their car loan. However, you can trade in a car you still owe money on. Plus, if the resale value for your car is good, it may not be too costly. 

Here’s how to do it!

Determine the value of your trade in based on the resale value of the car

Resale value is one of the aspects of a car that not everyone considers when buying. However, this will determine how easy and affordable it is to trade in a car you’re still paying for. If you’re lucky enough to have a car worth more than what you owe, you have positive equity in the car. However, you have negative equity if the opposite is true. 

Drivers with negative equity in their car will need to pay the difference between what they owe and the trade-in value. This is being upside down in a car loan. According to The Washington Post, this was the case in 1 out of 5 car sales that involved a trade in 2023. 

How it works

The process of trading in a car you still owe a balance on isn’t as confusing as most people may think. Buyers with positive equity will have money from the trade-in that they can apply to the cost of the new vehicle. This is why doing research and making on-time payments is necessary. 

People with negative equity wanting to trade in a car will pay more over time. Of course, it’s best for these types of buyers to wait until they have paid more of their balance. However, those who need a car may be able to do what’s called rolling over the negative equity into a new car loan.

People with negative equity wanting to trade in a car will pay more over time. Of course, these buyers should wait until they have paid off more of their balance. However, those needing a vehicle may be able to roll over the previous car’s balance into a new loan, which will cost much more down the line. 

Trading in a vehicle you still owe money on isn’t always the best decision. However, it is possible and the process can come in handy for some buyers.