How To Trade In A Car That Is Not Paid Off

How To Trade-In A Car That Is Not Paid Off – Is It Even Possible?

If you are looking for an upgrade or you are just not satisfied with the car you own, choosing to buy a new car is your best option. So the best thing you can do with your existing car is to trade it. But what if you are still paying for your car. How to trade-in a car that is not paid off?

Is it possible to trade-in a car that you haven’t fully paid off? You might be wondering if you haven’t paid off your car, you really do not own it yet. But indeed you can trade-in a car that you haven’t paid off. The process is a bit more tedious and involves an extra set of numbers, but it is possible.

Okay, so now you know you can trade-in your car even if it is not paid off. But you might wonder, what is the procedure behind trading it. And who will be willing to buy a car that is not paid off? Another huge concern is the extra numbers that were mentioned previously, they often cause trouble while trading in.

So if you are wondering how to deal with this procedure and make the most of your car, you are at the right place. Here is how to trade-in a car that is not paid off.

Can You Trade-In A Car That Is Not Paid Off?

Legally, yes you can certainly trade-in a car that is not paid off. The problem arises with the amount that you will get for your car. A lot of factors can affect the value that you get for your car. The main factors are the value of your car in the used car market during the time of the trade-in and how much you have paid for the car in total.

This will result in either one of these 2 scenarios. If your car is worth less than the amount you owe for the car, then that is called “negative equity”. Assuming you have paid off a decent amount and the car is more valuable than the amount you have left to pay, that puts you in the bracket of “positive equity”.

To make it even simpler, let us look at an example. Let us assume you bought a Toyota Prius for $25,000 which you now owe with interest. Now after thousands of miles under the hood you are trying to trade-in your car. At this point, your car is worth $16,000. You have already paid $5000 which leaves you a leftover sum of $4000. So, even after you trade-in your car you still owe $4000 for it. This is a situation of negative equity.

Trading In A Car With Negative Equity

So if you are facing a case like the above one you will be trading in your car with negative equity. In this case, the best option for you is to hold onto your car for a while, until you pay off your debt. Or at least until you get your car into a state of positive equity. But you also note that your car will lose value during the time you are holding it.

Trading in a car with negative equity brings more harm than good. As long as you can afford to make the payments, the best option is to hold on to the car for a little while longer. If you desperately want to trade-in a car with negative equity you have 2 options.

Paying The Difference

Let us take the situation from earlier as an example again. So you have a car that is worth $16,000 and you still need to pay $4000 for it. Here, you can pay off the $4000 negative equity upfront before trading the new car. By doing so, you now will not owe any more on the previous loan, since you are trading your car which is worth a sum of money, and the rest you have already paid off.

Now whatever the dealer offers, you for the car is the trade-in value and will be subtracted when you get your new car. This is the best option if you are trading in your car with negative equity.

Rolling The Negative Equity

Not everyone will have the means to pay the negative equity amount. After all, it can be much more than $4000 in some cases. In this scenario, the dealer would suggest rolling over the amount you owe for the car.

If we stick to the above example, you owe your car $4000, and assuming that the loan amount for the new car that you are purchasing is $20,000 the $4000 will be added to this sum. So the loan you have to pay for the new car is now a total of $24,000.

The reason why this option is not considered wise is that you would be adding a new interest amount. And that extra $4000 that you rolled over will also be subjected to this interest.

If you do not have the money lying around to pay the difference and you cannot afford to continuously make payments for your car, rolling over the amount while downsizing your car might be a valid risk. If you are downsizing even with the added amount the payment can be less than the payments you’ve been making all along.

Trading In A Car With Positive Equity

Unlike trading in a car with negative equity, trading in a car with positive equity is far less complicated. Let us assume you have a car worth $25,000 and now the car is worth $15,000. The difference at this stage is $10,000. If you have paid more than $10,000 already for the car, during the trade-in, you do not owe anything on your previous loan.

Furthermore, if you have paid an excess of $10,000, that additional amount is now your positive equity. This sum will now be reduced in your loan for the car that you are purchasing.

So if you are trading in a car with positive equity, the loan amount for the new car will be further decreased. Along with it the interest. If you want to further reduce the interest amount you need to pay, you can also make a down payment.

How to trade in a car that is not paid off

Do You Have Other Options For A Car That You Have Not Paid Off

In all fairness, selling a car to a dealer is not the best option. This is because the dealer is planning on selling your car as well. So if he offers the exact same value the car is worth, then he will not be able to make a profit on it. So when you sell a car to a dealer, his profit margin will be subtracted from the amount the car is worth, and that is the amount that he will offer for your car.

Since trading in is the same as selling your car, you might wonder is there another way that you can get a better price for your car. At least the exact value of your car.

The answer is yes. You can try selling your car to a private party. Even if you haven’t paid off your car, you can sell it. By following this path, you will get a better offer for your car, as the buyer is not planning on reselling it. So you should get an amount closer to the exact value of your car.

But the process of selling a car that is not paid off is a bit more time-consuming. Another problem with selling a car that is paid off occurs with negative equity. You cannot sell a car with negative equity. Unlike trading it in rolling over the amount is no longer an option. So if your car has negative equity, you need to pay off the difference, before listing the car for a sale.

Process Of Selling A Car That Is Not Paid Off

Selling a car to a private party or an individual is slightly more complicated than selling it to a dealership, especially if your car is still not paid off. The first hurdle that you will face is that you do not have the title. The title is held by the loan provider. It can be the dealership or any other loan provider. So this creates a bit of a complication, on the other hand, there are people who do it.

Since the process is a bit more tedious than handing over the title and receiving a check, some buyers are unwilling to go through this procedure. So before you get deep into the process, let the buyer know that you do not have the title and you owe money for it. This way the buyer won’t bail out of the deal during the process.

It is also wise to work with your car loan company to facilitate the private-party sale because they hold the title. This way they can make procedures to make the sale easier. If your loan provider is a credit union, local bank, or a bank with a branch near you, the process is simple. Collect the funds from the buyer, pay off the rest of the loan and transfer the title to the new owner.

The whole process can be done in the same place and it will not take more than an hour. Even if the loan is with a dealership the process is similar.

Suppose your lender cannot facilitate this process. This makes the process a bit more complicated. you may need to get a temporary operating permit from the Department of Motor Vehicles or Secretary of State. Then you have to figure out a buying arrangement with the buyer.

How To Find The Value Of Your Car

Before trading in your car or selling your car, first, you need to know the value of your car. Without knowing the value, it is almost like you are walking into a negotiation blind. Only by knowing the value of your car, you can negotiate around it and get the best trade-in value for your car.

Whether you are trading in your car or selling your car to a dealer knowing the value of your car will protect you from getting ripped off. How do you find the value of your car?

Pricing Tools

The best and easiest way to get value for your car is by using pricing guides online. There are tools that will allow you to find the value of your vehicle for free. The top 3 in this category are, NADAKBB, or Edmunds. In these pricing guides, once you input data such as the model of your car, year, mileage, etc… you would get an estimate of your car’s value.

Out of the above 3 NADA is considered the best.  This was created by the National Automobile Dealers Association. The valuation that you get for your car through NADA is based on real-world transactions. Due to this fact, NADA is considered the best and backed by most experts to give the most accurate value for your car.


Doing some research is another way to find the value of your car. You can check local and the online market for similar listings to your car. Platforms like Autotrader, Craigslist, and eBay Motors have tons of listings. Find what is similar to yours and the price asking for those cars.

More often than not this will give you a realistic value on how much you can expect for your car.

Factors That Can Affect Your Car’s Value

Before assuming a value for your, you have to understand that the value of your car depends on many factors. Knowing these factors will allow you to have a  realistic expectation of the offer you will get from a dealership.

The year and the model of your car affect the value of your car in a major way. Obviously, the newer the car, the higher the value. Other than the year of manufacture, the trim also determines the value of your car. Different trims offer different features. The better trims tend to have more resale value.

Other than the above factor, mileage also plays a huge role in determining the value of your car. Car’s tend to lose a lot of value after they pass 100,000 miles. A lower mileage will fetch you a better price.

The value of your car also depends on the condition it is in. If you took care of your car properly and followed up with the scheduled maintenance, your car will be in good condition. On the other hand, if your car is poorly maintained the resale value will decrease. Similarly, accidents can also decrease the value.

Whether you believe it or not, color can also affect the value of your car. In the U.S white and silver tend to be more popular than any other car. If you have a car with either of these colors you can expect a better offer at the dealership.

These are just a few factors that the value of your car depends on. Don’t overestimate the value of your car, by doing so, you’ll only be disappointed when you get an offer.

How To Get The Best Offer For Your Car

There are a few things that you cannot control when it comes to the value of the car. But some can be controlled. Not driving your car to reduce the mileage is not an option. But you can show proper care and do maintenance when needed. This will allow you to retain a lot of your car’s value.

At the last minute before the sale, there are some factors that you cannot control. But there are a few things that you can do to make your car look more pretty and get a better offer.

Last Minute Touch Ups

The first and most important thing that you should do before taking your car to a dealer is thoroughly washing it. There are many benefits you gain by washing your car, but at this moment you need to wash your car so it looks good. It will also give an impression that your car is well maintained. Making your car presentable and clean will give a good impression for whomever you are trying to sell it to.

Next, you need to take care of the glasses of your car. Clear up your headlights and clean your windows. This will make your car relatively neater and in better condition. Cleaning your lights is not a hard job at all. And this is one of those small things that you can do to make your car look better by spending as little as possible. Try using some toothpaste, those are sure to make your headlights look good.

how to trade in a car that is not paid off

If you have any door dings, you should invest some time into removing those.  If the dents are deep repairing them yourself is risky, and will cost a few bucks to get done by a professional. But smaller dings are easy to remove, and you can do it yourself.

These small procedures are not going to cost a lot. By spending a little bit of time and effort you can make your car look good. Having a good-looking car is sure to get a better offer when you are trading in your car. This can either reduce your negative equity or increase your positive equity.


Now that you know how to present the best car, to get a bit more of an edge you should be able to negotiate a fair deal. Whether you like negotiating or not, you should be ready to do so when you are trying to sell or trade-in your car.

Once you have prepped your car for a sale, and are ready for a negotiation, you can move forward, with trading your car. If you are wondering how to trade-in a car that is not paid off? And can these tactics help in any way? The answer is yes. It doesn’t matter whether you own the car or whether you are still paying for it. By getting the best offer you can reduce the dues that you would have to pay.

Is It Wise Trading In A Car That Is Not Paid Off

Now that you know how to trade-in a car that is not paid off, you might be wondering is it a wise decision. Whether it is wise or not completely depends on circumstances. If you can keep your car until it is paid off, that is the best option. Since you know how to trade-in a car that is not paid off, you can make a decision whether it is worth it.

Ultimately if your car is positive equity, trading it is not a bad idea. If you are willing to go the extra mile, you can try to even sell the car to a private party, because you will be able to get a better price for your car this way.

But if your car is in negative equity, the situation is slightly more complicated. If you can pay the difference it is fine to trade-in the car even though it is not paid off. But if you are rolling over the additional amount to the new loan, financially it doesn’t make sense since you will be paying more interest.

Facts: Trading in a Car You Haven’t Paid Off

  1. You can trade in a car with a loan, but you must ensure you control the transaction.
  2. Two situations can occur when trading in a car with a loan: positive equity and negative equity.
  3. Positive equity happens when the car is worth more than the amount owed on the loan, while negative equity happens when the car’s value is less than what’s owed.
  4. When trading in a car with negative equity, you have to pay the difference between the loan balance and the trade-in value, which can be paid with cash or another loan.
  5. Both the price of the new car and the value of the trade-in are negotiable, so use a car loan calculator to estimate these numbers before going to the dealership.
  6. Before trading in a car, you need to bring loan information, driver’s license, vehicle registration, vehicle keys, any remotes, proof of insurance, and a printout of your trade-in value.
  7. You can price your car by looking up the current trade-in value on a pricing guide such as Kelley Blue Book and Edmunds.
  8. To get a good price for your trade-in and new car, negotiate each separately and refer to the prices listed in online guides during negotiations.
  9. If you’re upside-down on your car loan, it’s better to postpone trading in until you pay off the loan, but if you need a car, trading in can provide relief by downsizing to a less expensive car.
  10. Once you’ve completed the deal, review the contract carefully and ensure all terms are in writing, and a few weeks later, check that your loan is paid off.

Bottom Line – How To Trade-In A Car That Is Not Paid Off

Trading in a car that is not paid off is a bit more complicated than trading or selling a car that is fully paid for. Rather than selling to a dealership, you can get a better price for your car by selling it to a private buyer. But it has a few limitations.

Whether trading in a car that is not paid off is wise or not is a decision for you to make. In most cases, it will be the best option. But if the situation demands it, you can go through with it.

Whether you are trading or selling, make sure to have your presentable. Maintain your car as long as you use it. That will retain most of the value of your car and will allow you to get the best possible offer.

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