How to Trade in a Car With a Loan

You can trade a car with an existing car loan.

If your are ready for a new car, it is possible to trade in your existing car -- even if it still has a loan. The dealership will pay off the car loan when you trade in your car for a new one. The biggest roadblock will be if your current car is worth less as a trade in than the loan balance. This is called being "upside down" in your current car.

Step 1

Collect information on your current car loan, including the lender's name, your account number and the lender's phone number.

Step 2

Select the new car you would like to buy at the dealership. While you are test driving the new car, have your current vehicle appraised for trade-in value.

Step 3

Give the salesman the loan information on your car so he can include the payoff amount when the price and payment is prepared for dealer's offer to you on the new car.

Step 4

Negotiate your car deal from the dealer's offer. Try to negotiate a lower price for the car you are buying, a better value for your trade-in and the best possible interest rate. The dealership will have room to negotiate in all of these areas, so keep asking for a better deal until they stop giving.

Step 5

Verify that the figures on the final agreed-upon details are correct. The new car loan amount should be the new car price, plus taxes and fees, minus the trade-in value, minus your cash down payment, plus the balance of your current car loan.

Tip

Research before you go to the dealership to improve your negotiations. Look up the blue book value of your car, the dealer cost of the car you want to buy, your current loan balance and prevailing interest rates for car loans.

Warning

If you are upside down in your current car, the dealership will probably require a cash down payment to get you out of the existing car loan and into a new car.

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