There is no required time to wait to trade in a car. Ideally, you might wait until you've paid off your loan or at least have positive equity before you trade in your car. Otherwise, you're almost certain to lose money on the deal.
You can trade a financed car at any point, but you may want to consider waiting a year or more. This is due to depreciation, which can see a new vehicle drop as much as 20% in value during the first year of ownership.
Key takeaways. If you owe more than the car is worth, meaning you have negative equity, you should pay off a car loan before you trade it in. If you have positive equity on the car, meaning you owe less than the car is worth, you can trade it in and use the positive equity towards a new vehicle.
Trading in a car generally helps you reduce how much you'll need to borrow when buying another vehicle, but if you have a balance on your current auto loan, you may be encouraged to roll your existing balance into a new loan, which will increase your total loan costs and the interest you'll pay over the life of your ...
If you recently took out a loan, you might still be upside down, where you owe more than the car is worth. In this case, it's best to wait until the loan balance is lower before you trade in the car. Otherwise, you could take a major financial hit. You'll get penalized.
The best mileage range to trade in a car is often between 30-40,000 miles or between two and three years old, before your new car warranties expire. You're more likely to receive a higher trade-in appraisal when it has fewer miles on it and more of its warranty left .
So, you can find out the value of your car and sell it to the dealer without thinking about your credit. If you are selling or trading in your car for another model, though, and are planning on financing, the inquiry process can impact your score. However, the vehicle trade-in itself carries no weight.
When you trade in a financed vehicle, the dealer might roll the old loan's balance into the loan for your new vehicle, if that amount is greater than the value of the trade-in. You can also use cash from the trade-in to pay off your old loan or simply continue paying your old loan until it's paid off.
If your car is worth less than what you still owe, you have a negative equity car also known as being “upside-down” or “underwater” on your car loan. When trading in a car with negative equity, you'll have to pay the difference between the loan balance and the trade-in value. You can pay it with cash.
You're allowed to trade in a financed car anytime. However, you'll be responsible for paying off the negative equity before the dealership will accept the trade-in. If you don't want to roll the balance into a new loan, consider waiting a little longer until you have positive equity.
"I Have a Trade-In"
Telling a salesperson upfront that you have a trade-in adds another ingredient to the car-buying stew they'll cook up for you. The more numbers you have in the game, the more chances they have to manipulate the final price or monthly payment.
Humble often want to know, “Can you trade in a financed car?” The answer is yes! However, keep in mind that trading your car in does not mean that you're no longer obligated to pay the remaining loan balance; you will still have to pay that remaining amount.
When you trade in a car with negative equity, the equity will likely roll into your new vehicle loan. Here's an example… If your current vehicle has $10,000 in negative equity and your new car costs $20,000, you will take out a $30,000 loan from the lender.
Your Car's Mileage Is Climbing
This milestone also marks the expiration of most bumper-to-bumper warranties, meaning trading in your car can help you avoid costly repairs. If you're looking to maximize the trade-in value, try turning in your vehicle before it hits 100,000 miles.
The end of the calendar year — specifically October, November and December — is typically one of the best times for car shoppers to get deals on vehicles. Cars sold during this time usually come with higher discounts and incentives than those sold during other times of the year.
Mileage matters. If your vehicle has more than 100,000 miles on it, that is a red flag for potential buyers. Even if your car has been dependable over 200,000 miles with relatively few problems, resale value is going to take a huge hit.
Legally, you can trade in your financed vehicle anytime. However, the financial implications vary. You're responsible for settling the remaining loan balance, regardless of the car's current value. Understanding your equity position is key to evaluating whether trading in makes financial sense.
The simple answer is yes, you can! Whether it's a good idea is another matter, and that'll come down to what your car is worth at trade-in and how much you still owe on the loan.
In some cases, the negative equity can be included in your financing when you buy a CarMax car. If not, we'll calculate the difference between your pay-off and our offer to you and you can pay CarMax directly. If the amount you owe is less than $250, we will accept a personal check.
Eventually you will need to disclose or the dealer will need to obtain the payoff on your current loan if you trade a vehicle. But the sales person has no right to that information during the negotiation process.
Your credit score won't impact the trade-in value of your car, but it will affect the interest rate you're able to get on the next vehicle you buy.
Yes, you can trade in a car with a seized engine. This is not the best option for most people, but it is an option. For some cars, it may be possible to replace the engine and still make a profit on the sale of the car.
The Bottom Line
If your car's trade-in value is more than your current loan balance, then you're all set—you can just pay off the old loan and apply the difference toward the cost of your new vehicle. But if you owe more on your car than its trade-in value, then you'll have to make up the difference.
100k Miles Or More
Yet, the more miles of your vehicle, the greater the depreciation. Vehicles within this milestone could still have a positive trade-in value even though they aren't in perfect condition. The condition of your car is looked at more closely as the miles grow on that odometer.
"After about the first 40,000 miles, vehicles depreciate at a slow and steady pace. The most dramatic drop-off is actually during the first 20,000 miles," Edmunds Senior Analyst Ivan Drury said. "The 100,000-mile myth is really just a psychological barrier that more and more car buyers are getting past.