What if I want to trade my car for a cheaper one?

If your trade-in is financed and you have equity, the dealer will pay the remainder of the loan and subtract the equity from the price of the less expensive car. If the equity of your trade-in exceeds the price of the car your trading for, the dealer will cut you a check for the difference.

What happens if I trade in a car I owe money on?

Your car loan doesn’t disappear if you trade in your car. However, the trade-in value of your car becomes credit towards your loan. This credit might cover the whole balance. If it doesn’t, your dealer will roll over your loan, combining the deficit with the amount owing on your new car.

Is it smart to trade in a car with negative equity?

Having negative equity on a vehicle isn’t the best state to be in because you will wind up paying more than it is worth. However, this shouldn’t stop you from trading it in. When you trade in a car with negative equity, the equity will likely roll into your new vehicle loan.

Can I trade in a car that I owe more than it worth?

If your car is worth more than the amount you owe on your loan, you’re in good shape. When trading in a car with negative equity, you’ll have to pay the difference between the loan balance and the trade-in value.

Can you trade in a car you owe more than worth?

When you owe more on your car than your vehicle is worth — or have negative equity — wait until you pay off more of the loan before trading in your car. Or if you’re able to sell your car yourself and get closer to the amount of your payoff, you might make out even better.

How can I maximize the value of my used car trade-in?

There are several things you can do to maximize the value of your trade-in: The appearance of your vehicle is an important consideration when a used-car manager estimates its value. If your car needs repairs, it could help to get an estimate to take with you.

How much equity do you get when you trade in a car?

Say you owe $5,000 on your car, and it’s worth $7,000 as a trade-in. You now have $2,000 of equity you can apply directly to the purchase of your next car. This equity is deducted from the negotiated price of the new car.

What are the tax advantages of trading in an old car?

There can be tax advantages, too. Most states require sales tax to be paid only on the difference between the price of your trade-in and the vehicle you’re buying, not the full price of the next car. But this tax benefit doesn’t apply if you sell your old vehicle yourself.