Trading in a car while it’s still under finance is a common concern for many Australians. Whether you’re looking to upgrade your vehicle or simply want a better deal, understanding your options is essential. In this guide, we’ll explore how trading in a financed car works, what to consider, and how to make the process as smooth as possible.
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Can You Trade in a Car on Finance?
The simple answer is yes! You can trade in a car that is still under finance in Australia. However, the process involves settling the outstanding loan amount before the vehicle officially changes hands. When trading in a financed car, the dealership or buyer will typically pay off your existing loan as part of the trade-in deal. The key factor is whether your car’s value is higher or lower than the remaining loan balance.
What Happens When You Trade in a Financed Car?
When you trade in a car with an outstanding loan, the dealership assesses the car’s market value and compares it to your remaining loan amount:
- Equity in Your Car – If your car is worth more than what you owe, you have positive equity. This means the extra amount can go towards your next vehicle purchase.
- Negative Equity – If your car’s trade-in value is less than your remaining loan, you have negative equity. In this case, the shortfall needs to be paid off before proceeding with a new loan, or it can sometimes be rolled into the new car finance.
Steps to Trade in a Car on Finance
- Check Your Loan Balance – Contact your lender to determine how much is left on your current loan. This helps you understand if you have positive or negative equity.
- Get Your Car Valued – Visit multiple dealerships or use online valuation tools to estimate the trade-in value of your vehicle.
- Compare Trade-in Offers – Not all dealers offer the same price, so it’s wise to compare offers before making a decision.
- Negotiate the Best Deal – If you have positive equity, negotiate to use the extra amount as a deposit on your next car. If you have negative equity, discuss how the dealer can assist in rolling it into your new finance agreement.
- Finalise the Trade-in and Loan Settlement – Once you accept an offer, the dealer usually contacts your lender, pays off the outstanding loan, and completes the trade-in process.
Things to Consider When Upgrading a Car While on Finance
Many Australians choose to upgrade their car while still under finance. Here are some factors to keep in mind:
- Check for Early Termination Fees – Some lenders charge fees if you pay off your loan early, which can impact your trade-in decision.
- Understand the Interest and Loan Terms – If you roll negative equity into a new loan, it may increase your repayment period and interest costs.
- Look for Special Offers – Some dealerships provide trade-in bonuses or special deals that can make upgrading more affordable.
- Credit Score Impact – Trading in and taking out a new loan affects your credit score, so ensure it aligns with your financial goals.
FAQs for can you trade in a car on finance?
1. Can I trade in my car if I still owe money on it?
Yes, you can trade in a car that is still under finance. The dealership will typically pay off the remaining loan balance as part of the trade-in process.
2. What happens if my car is worth less than what I owe?
If your car’s trade-in value is lower than your outstanding loan amount (negative equity), you may need to cover the shortfall or roll it into a new finance agreement.
3. Will trading in a financed car affect my credit score?
It can impact your credit score, especially if you take out a new loan. However, if you make timely payments on your new finance plan, your credit score should remain stable or improve over time.
4. Can I trade in a financed car with bad credit?
Yes, but your options may be more limited. Some dealerships and lenders specialize in working with buyers who have poor credit, though interest rates may be higher.
5. Do I need to pay off my loan before trading in my car?
No, you don’t need to pay off the loan yourself. The dealership will usually handle the loan payoff and factor it into the trade-in deal.
Final Thoughts
Trading in a financed car in Australia is entirely possible and can be a smart financial move if done correctly. By knowing your loan balance, researching trade-in values, and comparing dealer offers, you can make an informed decision. Whether you have positive or negative equity, understanding your options helps you navigate the process with confidence.
If you’re thinking about upgrading your car while on finance, consider consulting with car finance experts who can guide you through the best options available.
Ready to explore your next car upgrade? Contact trusted dealerships or finance specialists to get the best trade-in deal today!
