Life takes unexpected twists and turns. Sometimes things crop up meaning you need to sell your vehicle. You might need a quick cash injection, or you might have spotted a car that’s a better match for your current needs. But can sell your car if you still owe money?
How to Reduce Expenditure
No matter what, you are going to have to pay off your loan before you sell your car. Depending on how much you owe, this can present a challenge (especially if you go to traditional dealers, rather than to TRED).
Rather than trade in and lose money, let’s start by looking at the ways you can reduce expenditure on your vehicle.
Have you chosen the most cost effective car insurance? It might be cheaper to switch (even with the cost this incurs).
Maintenance is another expense to think about if you are looking to cut down on outgoing cash. Does it really need dealer-made parts? Can you find a cheaper mechanic? Check out our tips on finding a great mechanic (the dealer isn’t necessarily the best choice, and is definitely not the cheapest). Taking on maintenance yourself is another option.
How Much Do You Owe?
All cars depreciate during their first few years. With this in mind, consider how old the car is and how far you are into your payment plan. If this is the first year, it is likely that you owe more than the vehicle is worth, so you will find it difficult to find a buyer. If the money owed is more than the value of the car, this is known as being underwater.
One of the risks of trading in a car – especially when you owe money on the loan – is that you don’t get a fair price. At TRED, you are more likely to achieve a higher-than-average price thanks to the way we operate. (Think about it – if you were considering buying a car that had passed a rigorous 150-point test, wouldn’t you be happier to pay more as it was certified as reliable? Also, our business model means that you pay substantially lower transaction costs when you sell your car.)
After finding out how much your car is worth, work out if you are likely to pay off the balance after selling it. If you sell your car through TRED, we simply deduct the remaining loan amount out of your sale price, repay your lender, and cut you a check for the remainder. But, if that value won’t pay off the balance, you will need to subsidize this yourself. It’s simple – you agree in advance to cut a check to your financial institution for the difference.
If the size of your loan dwarfs the current value of the car, borrowing more money to cover payments isn’t a sensible option. If at all possible, keep paying the balance on the loan and check the value of the car every month. A point will come when selling it is a possibility.
What’s your car worth? Get an instant estimate from TRED in seconds.
Trading In While Underwater
Unless you paid a large amount down, it is likely that if you are in the early stages of the loan it will be underwater
Let’s look at some figures. Say your car is worth $8,000, but you owe $10,000. You can either pay the remaining $2,000 yourself or add that figure onto the loan for your next vehicle. If you have good to average credit, this transaction will be straightforward. If you sell through TRED, you simply pay the difference (in our example above, $2,000) to your lender.
Rolling over old debt onto new is nothing unusual, but it’s something you need to seriously consider. Be aware that this will be subject to the new financing rate, so make sure this is affordable. If your credit rating is bad, some dealers will also require a small payment.
Make Sure You Choose the Best Option for Your Circumstances
Selling your car when you still owe money on it is possible, but can be a challenge. Making sure you are aware of the figures – what you owe, what the car is worth, what you can afford – will ensure that the trade in accomplishes your goal.
Of course, there’s no one-size-fits-all policy that can be applied when it comes to trading in cars when the loan has not been paid off. But, if you use TRED, the process will be simple, fast, and your vehicle will be sold for more money than you thought possible.