How to Trade in a Car That’s Not Paid Off

August 3rd, 2021 by

Tiny car with coins and finance paperwork


Can you trade in a financed car? Yes! At Carlock Honda, trading in a financed car is simple. The most important thing to keep in mind is that trading in a car with a remaining loan balance doesn’t simply eliminate that balance. With that said, how does trading in a financed car work? If you’re ready to trade in your vehicle but you need to know how to trade in a car that’s not paid off before you can move forward, we’ve got the guide you need, below. Keep reading to learn more from our finance team!

How Does Trading In a Financed Car Work?

  1. Calculate exactly how much you still owe on your current loan. You should also be able to find this information on your monthly statement.
  2. Using a car trade-in calculator, you can get an estimate of your car’s current value. Just remember that this is merely an estimate; once your vehicle is inspected and appraised by the dealership, the actual value may be a little higher or a little lower.
  3. Is the remaining balance of your loan less than the estimated value of your car? If so, you’re in a great position for trading in a financed car! This would mean that you can use the trade-in offer to pay off the loan and still have some money left over to put toward your next purchase.
  4. Let’s look at a working example: If you still owe $10,000 on your Birmingham Area commuter and you received a trade-in offer for $12,000, you can pay off the loan and be left with $2,000 to put down on your next vehicle.
  5. What happens if the remaining balance of your loan is greater than the car’s estimated value? This is known as negative equity. Can you trade in a financed car with negative equity? Yes, but you would need to either pay off the balance before you buy your next car, or roll over the remaining balance into a new loan.

What Does it Mean to Roll Over a Loan?

Less reputable dealerships around Bessemer might tell you that they will pay off your current loan for you when you’re trading in a financed car, no matter how much you still owe. If that sounds too good to be true, it’s because it is. At Carlock Honda, we believe in transparency. When you roll over your loan, here’s what happens: The remainder of the loan balance is paid off, but the exact amount that was paid off by the dealership will be added onto a new loan. You’re still paying the price of the old loan balance, but you get to bundle it into a new loan, so you can get into the car you really want sooner than later.

Explore Your Trade-in Options at Carlock Honda

So, can you trade in a financed car? Carlock Honda is prepared to work with Mountain Brook drivers to get them into the car of their dreams, whether they have positive or negative equity on their loan. Contact us to learn more about your options!


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