Can you trade in a car that’s on finance? This is a common question among car buyers, especially those who are still paying off their current vehicle. Trading in a car on finance can be a bit complex, but it’s certainly possible. In this article, we’ll explore the process, the benefits, and the potential drawbacks of trading in a car that’s still on finance.
Trading in a car on finance means that you’re still making payments on the vehicle, and it’s not yet fully owned. This can make the process a bit more complicated, as the finance company or bank will need to be involved. However, with the right approach, you can successfully trade in your car on finance and move on to a new vehicle.
Understanding the finance agreement
Before you consider trading in your car on finance, it’s crucial to understand the terms of your finance agreement. This includes the remaining balance, the number of payments left, and any penalties for early termination. Some finance agreements may have clauses that prevent you from trading in the vehicle until it’s fully paid off, while others may allow for early repayment or a balloon payment.
Approaching the finance company
Once you have a clear understanding of your finance agreement, the next step is to approach your finance company. They will need to be informed of your intention to trade in the car and may require certain documentation, such as the car’s registration and service history. It’s important to be transparent and honest about your situation, as this will help the process go smoothly.
Evaluating the car’s value
Before you can trade in your car, you’ll need to have it evaluated. This will help determine its current market value, which will be used to offset the remaining balance on your finance agreement. Keep in mind that the value of your car may be lower than what you owe, which means you’ll need to come up with the difference, known as “negative equity.”
Options for dealing with negative equity
If your car’s value is less than what you owe, you have a few options. You can choose to pay the difference, which may require a lump sum payment or refinancing. Alternatively, you can roll the negative equity into your new car loan, which may result in higher monthly payments. It’s important to weigh the pros and cons of each option before making a decision.
Trading in the car
Once you’ve worked out the details with your finance company and have a plan for dealing with negative equity, you can proceed with trading in your car. This involves finding a new vehicle, negotiating the price, and then completing the paperwork to transfer the finance agreement to the new car.
Conclusion
Trading in a car that’s on finance is possible, but it requires careful planning and communication with your finance company. By understanding your finance agreement, evaluating your car’s value, and dealing with negative equity, you can successfully trade in your car on finance and move on to a new vehicle. Always remember to consult with your finance company and seek professional advice if needed, to ensure a smooth and hassle-free process.
