Can I Trade in a Car with a Loan?


Before you can go ahead and trade in a vehicle, you’ll need to determine if you still owe money on it. However, even if you do, you can still exchange that automobile for a new one.

The team at Ira Toyota of Tewksbury will explain how exactly you can trade in a car with a loan. We’ll cover positive and negative equity, what they mean, and how either one would affect the trade-in process.

Read through our informative guide and feel free to contact our Toyota dealer near Lowell, Dracut, and Tewksbury if you have any questions.

Determine What Kind of Equity You Have

The first thing you’ll want to do is determine what kind of equity you have, whether that’s positive or negative.

Positive equity is when the value of your car is more than what you currently owe on it.

Negative equity, on the other hand, is when your vehicle is worth less than what you still owe on it. With negative equity, you’re “upside-down” on an auto loan and would need to pay the difference between the balance and trade-in value.

Trading in a Vehicle with Positive Equity

When you go to trade in a car at the dealership, a staff member will perform a thorough assessment. After that’s done, they’ll determine a value based on its current condition. Then, that number is subtracted from the price of the new automobile.

When you trade in a car with a loan, the dealer will take over the loan and pay it off. They’ll also handle the paperwork for you, making the process as convenient as possible.

If your vehicle is considered to be positive equity, the extra money can be applied directly to the purchase of your new ride. You’ll just need to provide financing for any remaining amount, which can be done in the form of cash or a new auto loan.

Trading in a Car with Negative Equity


On the other hand, the car may be considered negative equity. To illustrate exactly what this means, let’s say you owe $10,000 on a vehicle, but it’s worth $9,000. The trade-in would cover the bulk of the loan, leaving you to owe $1,000.

There are a couple of ways to handle this situation. You could postpone a new car purchase and trade in after you pay off your current loan. Another option is to roll the remaining balance onto the new loan.

If you opt for the latter, try to keep the loan term 60 months at the most. Otherwise, you could be paying more on interest and get into another upside-down situation.

Start the Trade-in Process Today

If you have any questions about the trade-in process, don’t hesitate to contact the team at Ira Toyota of Tewksbury.

Our finance experts have years of experience handling loans for drivers in Lowell, Dracut, Tewksbury, and beyond. They’ll also work with you through each step of the trade-in process, providing a seamless transition from one automobile to another.

Don’t wait. Contact us to begin your trade-in journey today!