Can a Car Dealer Trade in My Car & Pay Off My Loan?

Accepting trade-ins and paying off existing loans are common practice for dealerships. Most dealers can also arrange new loans, allowing you to carry over negative equity if you owe more than your car is worth. Depending on the value of your car, you may have to put money down toward the new loan or may receive a credit to put toward your new balance.

Trade Value

Dealers offer trade amounts based on wholesale value. Depending on the dealer, it may use the NADA guide, Black Book or Galves appraisal guide to determine an acceptable value. To gauge wholesale value yourself, use Edmunds.com, NADAGuides.com and the Kelley Blue Book website to access appraisal tools. Use a median of the three values for a fair expectation. Your vehicle's value is reduced if the car needs repairs or body work. Dealers may also offer more money for a well-maintained vehicle in excellent condition.

Loan Payoff

Expect to provide your bank information and account number or social security number so your salesperson can call for your vehicle's payoff amount. Unfortunately, a dealer representative must call for the payoff amount to ensure it is correct, so have your account number ready if offering your Social Security number makes you uncomfortable. If you owe more than your vehicle's value, you can put money down or transfer the negative equity into your new loan. If you owe less than the vehicle's value, you can use the credit as a down payment.

Paperwork

Have your title ready. The dealer needs it to complete your trade-in paperwork. A co-owner, if one exists, must also sign the title. Expect to sign an authorization form that allows the dealer to satisfy the loan on your behalf. Once you complete your trade and new car purchase, your dealer processes your paperwork with your state's motor vehicle department, new and old lender. Contact your old lender after 10 business days to ensure the loan is satisfied.

Old Loan

If you have a payment due during the shopping or trade process, be sure to pay it. Even though the dealer must pay off your old loan completely, it may take time to do so. Most dealers complete this process quickly. If your payment is late, your lender will notify the credit bureaus, which can affect your credit standing. If your last payment has not been processed yet and the dealer pays off the loan, your old lender will return the payment to you.