Sick of Your Car but Still Owe On the Loan? Here’s How to Trade It In

August 13th, 2021 by

A close up shows a car key.

A year or so ago, a new car sounded like a great idea. After visiting a few dealers and test driving a couple of options, the last dealer put a little pressure on you. You were tired and very sick of car shopping, so you signed on the dotted line and headed home. One day, you woke up full of regret, rushed to your computer, and googled how to trade in a car that’s not paid off. Sound familiar?

It happens more often than you might think, and often the culprit is an overly pushy salesperson that refuses to take no for an answer. It’s also pretty common for shoppers to “hit a wall” and settle for good enough rather than holding out for the perfect car. Unfortunately, the seriousness of the situation doesn’t always settle in until it’s too late.

If you find yourself driving a car that isn’t right for you, but you still owe a whole lot on the loan, don’t worry! You have options – and not just the ones that will end up losing you hundreds or even thousands of dollars. The used car market is booming, which means sellers like you stand to gain big. Read on for our guide on how to trade your not-paid-off vehicle.

Assess The Damage

The first thing you want to do is shed some light on your situation. That involves calling the lien holder (the bank or leasing company) and finding out your payoff. Next, you’ll want to visit a site like Kelley Blue Book and determine your vehicle’s value. There are two different values to consider: private sale and trade.

With a private sale value, the dollar amount takes into consideration the fact that you’ll be handling 100 percent of the sale on your own. That means advertising, screening buyers, handling the paperwork, dealing with the lien holder to ensure the loan is paid off, and making sure the title reaches the new owner. In short, it’s a lot of work.

The trade value represents a fair market value for your vehicle if a third party, like an automotive dealer, takes responsibility for the sale of your vehicle. In a trade situation, you simply drive to your local dealer, hand them the keys, agree on a value, and walk away. The dealer handles everything from soup to nuts, so you don’t have to do anything except have fun choosing a new car.

The best part about trading in your unwanted vehicle is it’s done and over with quickly. You don’t have to worry about fielding inquiry calls from unqualified buyers or meeting in a dark parking lot after work to facilitate a test drive. It’s all handled for you. This is important to keep in mind when you consider the difference between private sale value and trade value. There is a big cost in both time and money associated with selling a vehicle.

A man is calling his bank after learning how to trade in a car that's not paid off.

What It Means to Be Upside Down

There are cases where you owe more on your loan than the vehicle is worth. This is commonly referred to as being “upside down.” There are a few reasons why owners find themselves in this position, the most common of which is when you purchased the car under some kind of financial duress, such as at a time when your credit score is low (due to bankruptcy or some other credit issue).

Dealer finance professionals work hard to get buyers of all credit scores and financial backgrounds approved for a car loan. They do so because often, these buyers require a reliable vehicle to get to work. Buying that car commonly represents a turning point for credit-challenged buyers, which is why there are resources that specialize in extending high-risk credit. Understandably, interest rates are significantly higher in these cases.

If you are upside down in a high-interest loan, it’s still worth exploring a trade with your local automotive finance expert. Why? They can mitigate your taking on any additional risk by running your credit report and looking for score increases, which ultimately puts you in a position of being approved for a lower interest rate loan. Finance pros can get creative and help you restructure the debt so you can come out on top with your next vehicle.

The bottom line is to connect with a finance professional in the industry, ideally at a dealership that carries the vehicle you want. Their expertise, along with their access to dozens of lenders, puts them in a unique position to custom tailor a solution to your individual budget, credit score, and overall financial situation. Everyone deserves a second chance, and these pros will help you get yours.

What If You Changed Your Mind Quickly?

For some of us, it doesn’t take very long to realize we’ve made a mistake. We let a few weeks, or maybe months, pass and come to the slow realization that the vehicle we chose is all wrong for us. Maybe it’s too big, the seats are uncomfortable, or you’re lamenting forgoing the luxury trim you really wanted – there are dozens of reasons why, but for many, buyer’s remorse is a painful reality.

What are your options if you’re sitting on a loan with the ink of your signature barely dry? Surprisingly, you have a lot of options. Everyone knows that a new vehicle’s value drops sharply the moment you drive it off the lot, but in many cases, there’s still enough demand that you can reverse your decision without too many financial implications.

Your best bet in this scenario is to check your vehicle’s value (remember Kelley Blue Book?) and call your salesperson immediately. A high-volume dealer with a hardworking sales staff will likely have a list of buyers waiting for a specific vehicle, and yours might be the one. Notifying your salesperson will get the ball rolling, so everyone can go to work finding a solution.

With an in-house transaction (where the dealer handles the sale and purchase without having to keep the car sitting on the lot for days or weeks waiting for a buyer), it’s possible that the salesperson can keep your costs on the low end. But know that changing your mind early is probably going to come with at least a little financial pinch.

A silver toy car is shown parked behind of stacks of coins.

Don’t Keep Driving a Car You Don’t Like

The truth is, buyer’s remorse is very real and all too common, especially when it comes to a vehicle. The car we drive can seriously impact our lifestyle, especially if life includes a long daily commute to work or lots of errands and driving back-and-forth to kid activities. If your vehicle is uncomfortable, unsafe, or undersized for the job, life can get pretty miserable.

If you find yourself hating what you drive or looking to exit your loan early for any reason, there are plenty of avenues that will get you to a resolution. Simply taking a few moments to learn your vehicle’s current value can sometimes ease the stress. Today’s cars retain their value more than ever before, thanks to high-quality manufacturing, so the situation is probably not as bad as you think.

The most important thing is not to beat yourself up. Also, don’t assume your options are limited, even if you find yourself upside down. The best thing you can do is contact a professional and rely on them for assistance and advice. There is no such thing as being stuck in a loan or lease: there is always a way out, and it doesn’t have to cost you thousands.