Trading In a Car You Still Owe Money On: Your Guide

Yes, you can absolutely trade in a car even if you still owe money on it. When you trade in your vehicle at Horne Nissan or Horne Chrysler Dodge Jeep Ram, we'll handle the existing loan payoff as part of your new vehicle purchase or lease. The key is understanding the difference between your car's trade-in value and its loan payoff amount.

Understanding Payoff vs. Trade Value

When you decide to trade in your current vehicle, there are two important figures to consider: the payoff amount of your existing loan and the market value of your vehicle as a trade-in. Your loan payoff amount is the exact figure required to fully satisfy your current auto loan, including any accrued interest. This is usually different from the remaining balance you see on your monthly statement, so it's best to get an official payoff quote from your lender.

On the other hand, the trade-in value is what Horne Nissan or Horne Chrysler Dodge Jeep Ram is willing to offer for your vehicle. This value is determined by several factors, including the car's make, model, year, mileage, condition, and current market demand. You can get an estimate of your car's trade-in value by using our value your trade tool on our website.

Positive and Negative Equity Explained

Understanding equity is crucial when trading in a financed vehicle. Equity is simply the difference between your car's trade-in value and your loan payoff amount.

• Positive Equity: You have positive equity when your car's trade-in value is higher than your loan payoff amount. This means after your current loan is paid off, you'll have money left over. This surplus can then be applied as a down payment on your new vehicle, potentially reducing your new loan amount and monthly payments.

• Negative Equity: You have negative equity when your car's trade-in value is less than your loan payoff amount. This means you owe more on the car than it's worth. If you trade it in, you'll still be responsible for paying the difference between the trade-in value and the loan payoff. This difference is often referred to as being "upside down" on your loan.

How Your Payoff is Handled at Signing

When you trade in your vehicle at Horne Nissan and Horne Chrysler Dodge Jeep Ram, the process for handling your existing loan is straightforward. Once you've agreed on a trade-in value for your current vehicle and selected your new car from our new inventory or used inventory, our finance team will work with you. We'll obtain the official payoff amount from your lender. The trade-in value of your old car will be applied towards this payoff. If there's positive equity, it will go towards your new purchase. If there's negative equity, we'll discuss your options for handling that difference.

Our finance professionals will integrate the payoff into your new financing agreement. This means you won't have to deal directly with your previous lender for the payoff; we'll manage the transaction for you, simplifying the entire process. You can start the financing process by submitting a credit application online, which covers both Horne Nissan and Horne Chrysler Dodge Jeep Ram.

Options for Handling Negative Equity

If you find yourself in a negative equity situation, don't worry – you still have options. One common approach is to roll the negative equity into your new car loan. While this makes the trade-in process seamless, it's important to understand the implications. Rolling negative equity into a new loan means you'll be financing a larger amount than the value of your new vehicle, which can lead to higher monthly payments and you'll pay more interest over the life of the loan.

To reduce or eliminate negative equity, consider these alternatives:

• Pay the Difference Out of Pocket: If possible, paying the negative equity amount directly at the time of trade-in is the most financially sound option. This prevents it from being added to your new loan.
• Sell Your Car Privately: If your car's private sale value is significantly higher than its trade-in value and your loan payoff, selling it yourself could be an option to eliminate negative equity before purchasing a new vehicle. However, this also involves more effort on your part.
• Wait and Pay Down Your Current Loan: If you're not in a rush, continuing to make payments on your current loan to build more equity can be a wise choice. You might even consider making extra payments to reduce the principal balance faster.

Our team at Horne Nissan and Horne Chrysler Dodge Jeep Ram is here to help you explore all your options and find the best solution for your individual situation. We aim to be straight with you, as Leone mentioned, "When you go in ask for eugene he will talk you everything you need to know and he will be straight with you."

Why Rolling Negative Equity Can Cost More Over Time

While rolling negative equity into a new loan can seem like an easy way to get into a new vehicle, it's important to understand the long-term financial impact. When you add negative equity to a new car loan, you are essentially borrowing money on top of the new car's price. This increases the total amount you finance, which in turn leads to higher interest charges over the life of the loan. Your monthly payments will be higher than if you had positive or zero equity, and you will pay more in total interest by the time the loan is paid off.

Additionally, starting a new loan with negative equity means it will take longer to build positive equity in your new vehicle. This can make future trade-ins more challenging if you decide to upgrade again before paying down a significant portion of your loan. Our finance experts can walk you through different scenarios to help you make an informed decision that aligns with your financial goals.

We invite you to visit Horne Nissan and Horne Chrysler Dodge Jeep Ram at 2046 E Highway 60, Globe, AZ 85501, or contact us to discuss your trade-in. Our sales team is available Mon–Fri 8:00 AM–6:00 PM and Sat 9:00 AM–5:00 PM. "David Ray was an easy guy to connect with - No pressure. After sale support with Horne associates is exceptional." — R. Wickwire.