How To Trade in a Car That is Not Paid Off

Many people are asking if it is possible to trade in a car that is not paid off. The simple answer is YES!

If you are looking at driving a new car but you still owe a current loan on your present car, you can trade in your car and get a new car.

This article will help you with the steps you need to take to trade in a car that is not paid off.

Trading in a car that is not paid off is possible, but the process of accomplishing it depends largely on how much you owe.

You can trade in your car with a loan for a new car, but first, you must make sure you know how much equity you have in the car.

What is Equity?

Simply put, the equity on your car is the difference between the current value of your car and the amount you owe on the loan.

What are the Types of Equity?

There are two types of equity: Positive Equity and Negative Equity.

Positive Equity

Positive Equity is when your car is worth more than the current loan you owe.

When you trade in your car, the car dealer applies the equity you have on the car towards the purchase of the new car, which invariably reduces the amount you need to pay for the new car you want.

Let’s say you currently owe a $7,000 loan on your car, which is worth $10,000 as a trade-in car. Now you have $3,000 as your positive equity, which you can apply in order to purchase your new car.

Negative Equity

Negative Equity is when the worth of your car is lesser than the current loan you owe.

This means that you owe more on your current loan than your car is worth. In this case, it is still very possible to trade in your car to the car dealer, but you have to consider the following carefully:

The difference between the trade-in car amount and the current loan amount.

If you have the money within your reach, it is better to pay off the difference between your trade-in car amount and your current loan. This will help to give you a new start.

Rollover Your Negative Equity Into Your New Car Loan

This may seem like the easier way to go, but doing this will increase your total new loan amount, which may lead to an increase in the amount of interest you pay. Why this is good in a way because you have the opportunity to have a new car while you pay off your old and new loans together.

Postpone Your Trade-in

You can likewise decide to delay the trade-in of your car until you are able to pay off the car loan amount.

3 Steps to Trade-in a Car That Is Not Paid Off

Take the following steps to Trade-in a Car that is not paid off:

1. Research the Estimated Market Value of Your Car

 When you need to trade in your car for a new one, you must research the estimated market value of your car. Knowing the estimated market value for your car will give you a good ground to negotiate with the car dealer. This will enable you to have an idea of the positive or negative equity of your car.

2. Get Multiple Market Value Estimates for Your Car

Reach out to or contact multiple car dealers to have multiple estimates for your car. This will give you better negotiation power.

3. Read the Sales Agreement Documents Carefully and Close the Deal

Be sure to carefully read through the sales contracts before you close the deal. Make sure every single aspect of the sales contract is spelled out. Once this is done, you can sign and take your cat home.

Documentations Needed to Trade in a Car That Is Not Paid Off

To trade in a car that’s not paid off, you will be required to bring the following items to the dealership:

  • Driver’s license
  • Loan information — including payoff amount and account number.
  • Vehicle registration.
  • Proof of Insurance
  • A copy of your trade-in value
  • Vehicle keys and any remotes.


To Trade-in a car that is not paid off, make sure you follow the steps mentioned above in order to have a smooth transition from your old car to your new car.

I hope this helps you to make better decisions whenever you decide to trade in a car that is not paid off.

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