How do car trade-ins work when you still owe money on the loan?
I am getting tired of my car, but I still owe a few thousand dollars on the car loan. My brother said I should trade the car in, but how do car trade-ins work when you still owe money on your loan?
Yes, you can trade your old car in for a new one even if you still owe money on your loan. However, this might not be your best option.
If you owe more on the loan than your car is worth, trade-ins may be a little more complicated. In this situation, your remaining debts will get rolled into the new loan. This means your monthly payments will be higher than usual.
Let’s say you owe $7,000 on your car, but its value is only $2,000. When you trade it in for a $10,000 car, the dealer subtracts the car’s value from your debt but holds you accountable for what you owe. So you’d owe a total of $15,000.
Alternatively, trading in your car can be a great idea if you owe less on your car than it’s worth. In that case, trading in your car would help you pay off your loan and still leave you with leftover capital to invest in your new car!
To pay off your loan as soon as possible, you can start saving on expenses like car insurance with Jerry. A licensed broker, the jerry app can help you find and compare competitive quotes in under a minute. Jerry’s users save an average of $897 a year—and it only takes a minute to sign up!
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