Can you trade in a car with a loan?

I want to get a new car because I’m moving to an area that gets a lot of snow and my current vehicle isn’t really cut out for winter driving. Unfortunately, I still have some debt on the car. Is it possible to trade in a car that still has a loan?

Selling your car can be a complicated process, especially when loans are involved. That being said, you can trade in a car with a loan! Of course, the loan won’t just disappear. Any equity that you have in the car will roll over to your new car loan.
If you have negative equity on your loan, your dealer will add the amount that you still owe on your old loan to your new one. For example, if you trade in a car worth $3,000 that you owe $5,000 on, your lender will add an additional $2,000 to the loan you take out or the cost of your car.
But if you have positive equity, your dealer will apply your remaining equity to the cost of a car. So if you trade in a car worth $5,000 that you owe $3,000 on, your dealer will subtract the remaining $2,000 from the cost of your car or your car loan.
Remember, you’ll also need a new insurance policy when you get a new car. To make sure you’re getting the best rate on the coverage you need, try Jerry. A licensed broker, the Jerry app can help you compare personalized quotes from over 50 top providers like Progressive and Nationwide for free!
Liz Jenson
Answered on Nov 20, 2021

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