Like I'm 5: trading in a car

[heightsyankee]

What the hell happens when I trade in a car that isn't fully paid off for a new car? I am ignorant about this. I only had cheap, used cars until we bought the one I drive now. At my request, my husband handled the transaction side. Now that I am pretty much done with big strollers and all that gear, I want to trade my midsized SUV for a station wagon. I want to do it on my own but am clueless.

[y4m]

You'll get a better deal selling it private party first, then taking that money to your new car purchase. Does whoever owns your current loan have a local branch? You can meet the buyer there for the final transaction.

[formerlyak]

That happened to me with an old car. I had to either pay off the other car in full, or qualify for enough of a loan to cover both the new car and the remainder on the old car (which is what I had to do).

[friskypanda]

The dealership will determine a trade in value for your car and subtract that from the new car price. The balance of the old car loan will be added to the price. The dealership will contact the current lien holder and send them the money.

[friskypanda]

Can't edit posts?
Anyway, so if they say your car is worth $2000 and you owe $1000, then $1000 is credited towards your new car price. If your car is worth $1000 but owe $2000, then $1000 is added to the new car price.

[Beeps (WOT?*)]

May 10, 2012 14:30:00 GMT -5 y4m said:

You'll get a better deal selling it private party first, then taking that money to your new car purchase. Does whoever owns your current loan have a local branch? You can meet the buyer there for the final transaction.

Not necessarily true. It depends on a number of factors. My old Explorer had one nearly identical listed on Craigslist for $3500. My car was two years newer but with identical mileage and options. The first dealer was the typical used car salesman who haggled for everything, the second dealer offered $3K for the trade on on a vehicle he was selling me (at my price which was a considerable savings over the other dealer). It wasn't worth it to me to try to sell my car in competition with another one over a $500 difference - and I could have no doubt gotten the $3500 if I'd haggled.

What happens at a dealership is that they will give you what they consider a reasonable value for the trade of your vehicle on a new one. Before you go in, check your paper, Craigslist, dealerships in the area, harmonautos.com, kbb.com, edmunds.com for a fair value of your car so you know what it's worth (the first dealer was reluctant to go over $1000, or so he claimed. I was tired of dealing with him.)

When you buy the new car, part of the loan amount will include a payoff for the remaining balance of the loan on the loan of your vehicle. They will take the money and pay off your car. You will sign papers for the purchase of your new car and the sale of your old car to the dealership as part of the transaction.

ETA: Friskypanda gives an excellent example of credit toward a trade-in.

[Beeps (WOT?*)]

Frisky -

If you look to the upper right of your post, you should see a "modify" button (along with "quote" and "delete")

[heightsyankee]

OK- sorry, I posted and had to leave before.

I have a 5 year note and am 3 years in. The car I want to trade it in for is about the same price new as my car was.

So, they'll add the balance of my current loan to my new loan? Does that mean I'll basically be paying my new car note and the remainder of my old car note?

I have no idea why I can't figure this out on my own. Can I blame my kids?

[formerlyak]

Yes, that is what it means. You will be paying the new car note + the old car note - the value of the trade in that the deal will apply to your balance.

[heightsyankee]

So basically I just need to wait until this car is paid for, or else I could be paying $40k for a $30k car... Good to know.