Is it Difficult to Change a Loan Over to a Different Car?

If you want to cancel one vehicle loan and finance another, expect to pay off your current loan first and then apply for financing for the other car you want. You can't actually transfer a car loan to another vehicle, because the vehicle is not the same. You can, however, trade your vehicle toward another purchase, or sell the car on your own to satisfy your current auto loan.

Vehicle Value

Auto loan providers base a loan amount on a vehicle's market value. For this reason, you can't transfer a loan to another car; the new vehicle you want to finance is assessed differently. Lenders base your loan amount on the vehicle's market value, which depends on its year, make, model, mileage and features. So, you aren't likely to obtain a $20,000 loan on a vehicle worth only $10,000. Even if you purchase the exact same vehicle, you aren't guaranteed that both vehicles are worth the same amount. Your vehicle may be depreciating faster than you're paying toward your loan, or other market conditions may create a difference between your car's original and current lending value.

Credit Information

Having an approval for one car loan does not guarantee another car loan approval. Any time you alter a loan or initiate a new finance contract, the lender reviews your credit information and credit application to determine whether to extend a loan. Based on your payment history, current accounts and credit balances, your lender will adjust your interest rate based on your lending risk. You may still obtain another loan, but perhaps with a different interest rate if your credit has changed.

Trade Process

If you plan to purchase a car from a dealership, you can trade your vehicle in toward your new car purchase. To take your car for a trade-in, your dealer must pay off your old car loan. Many dealerships also handle financing for customers, so you can use your dealer to find a new auto loan provider, as well. The trade process is very similar to selling your car, except your dealer handles most of the paperwork. Once the trade-in process is complete, you'll pay only your new auto loan provider.

Private Sale Process

You can also sell your old car before you purchase a new one. Make sure you have been pre-approved for a loan before selling your old car. To sell your car while it still has a loan, you'll have to find a buyer and satisfy your loan to officially transfer ownership to the new owner. Talk to your bank to find out how much you must pay to satisfy your loan amount. If you can sell your car for more than the loan payoff amount, you may keep the profit. Otherwise, you'll have to come up with the remaining balance due for your loan.