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Will a car dealership pay off my old car loan?
I want to trade my old car in for a new one, but I haven’t finished paying off my car loan yet. Will the dealership pay off my loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
During a
trade-in for a car with a loan
, the dealer gives you the trade-in value for your car and then pays off the remainder. However, it’s possible that the trade-in value won’t cover the entirety of the original loan.If the trade-in value is less than the old loan: You have
negative equity
, and the dealer will roll over the remaining amount into a new loan.If the trade-in value exceeds the old loan: You have positive equity and can put that money directly toward the new car.
Here’s an example. Let’s say you get a trade-in value for your car of $8,000, but you still owe $10,000 on your loan.
Once the $8,000 from the trade-in is applied, you’ll be short $2,000. In this case, the dealer will pay off the loan but they’ll add $2,000 to the balance of your new loan.
Best of luck with the trade-in!
View full answer
- Gregory R.
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