How to Trade In a Car You Still Owe Money On

There are several good reasons to trade in a car. For example, a family welcoming a new baby might need to trade in a pickup truck for something a bit roomier. The owner of a vehicle that guzzles gas or has racked up tens of thousands of miles might consider trading it in towards something more affordable or reliable. However, if there is still money owed on the original vehicle, the transaction will not be as straightforward.

Be sure to maintain your current vehicle as well as you possibly can. Perform oil changes and other recommended maintenance on schedule. Keep the exterior and interior free of scratches, dents or stains. The better the car's condition, the better the trade in value it will reap. This is important, since the financing on a newer (or even new-to-you) car will include the remainder of the older vehicle's payments.

Keep your credit score up. Your previous debt will be rolled into the financing for the newer vehicle, and many banks or credit agencies will turn down this type of loan unless the borrower has good credit. If you are uncertain about the condition of your credit, check it out. You are entitled to one free credit report each year from all of the reporting bureaus. Get yours by visiting AnnualCreditReport.com.

Be prepared for a lengthy payoff period. You will require a new loan with new terms to finance the next vehicle, so you will be starting from the ground up again. In addition, if you still have a considerable payoff amount remaining on your current car, this amount minus the trade-in price you receive will be rolled into your new loan. This can also mean a larger monthly payment. If you are able, build up a bit of savings to add as a down payment on the new vehicle. Between any money you put down and your current car as a trade-in, you may be able to lower the amount of financing you will require significantly.

Research your current vehicle's value. Kelley Blue Book, the largest vehicle valuation company in the U.S., has a free website that will help you determine the car's trade-in value. Arming yourself with this information will help you get the best deal.

Get in touch with the dealership from whom you purchased your current car. They may be more likely to work with you, since they are familiar with you and your car. Another consideration is selling your car outright. You may get more for it this way. One caveat, though, is that you will need to pay off the loan before you can transfer the title to a new owner, so be prepared.