How soon can you trade in a financed car?
And the best way to do it
Some quick statistics that might surprise you:
- 85.4% of vehicles purchased in America are financed.
- The average length of a car loan in America is 67 months.
These staggering numbers coincide with the ever-rising price of the average new car as more and more Americans struggle to afford everything from higher rents to increased healthcare costs.
This means longer loans, lower interest rates, and higher-priced vehicles. Pair that with taxes, fees, and depreciation and you may find yourself owing more on a car than what it’s worth.
For many, the reality is that a vehicle may not fit their needs or wants for the duration of a loan. Whether you’re looking at adding children to a family or persistent repair issues, there are a myriad of reasons why someone might want to trade in a financed car.
This article will tell you how soon you can trade in a financed car and the best way to do it.
DOWNLOAD THE APP
The CoPilot app is the smartest way to buy a car. Search all listings in your area, get notified about deals, new listings, and price drops, or chat with one of our copilots for some hands-on advice.
You can trade in your car immediately after buying it
Hate your new car, or feel like you got ripped off? Technically, you can trade in or sell your car the day after you purchase it.
Whether or not this makes sense for your personal financial situation is entirely up to you, although trading in cars quickly is usually not ideal.
If you can’t afford a new vehicle or can’t secure financing for a new loan, you may have to wait a few years to pay down the balance of your existing loan before a bank will give you a new one - this is largely dependent on your credit score.
How to trade in a recently-bought car
Step 1: Know the (true) worth of your vehicle
If you show up to the dealer looking to trade in your existing vehicle, you’re going to want to be know the value of your vehicle before trading it in. While this is easier with a recently-bought vehicle, you’ll still need to factor in depreciation, mileage, any damage done to the vehicle, and market factors to get an accurate worth of your vehicle.
The best way to find the value of your vehicle is to take it in to several dealerships and see what they’ll offer you for it. While time-consuming, you’re likely to get more if you take your vehicle into the lot in person than if you’re selling it remotely.
There are many trade-in value estimators available, like the one in the CoPilot car shopping app, that will give you a realistic estimate of your vehicle’s trade-in value. Vehicle factors like mileage, damage, and cosmetic issues will affect the final sale price.
We recommend that you steer away from those “sell your car online instantly” services - these work by offering you the average value for your car, then inspecting them & adjusting the sale amount once they’ve actually seen the vehicle. Plus, they tend to offer you the lowest amounts for your car, since they’re offsetting a lot of risk with low trade-in values.
Step 2: Do the math
When you purchase a new vehicle, you are financing the TOTAL price of the vehicle, which is the total cost of purchasing a vehicle, minus the down payment (if any).
The individual components include:
- Vehicle Price (including accessories)
- Warranty (if purchased)
- Tax
- License & Fees
This is the total amount financed, or the total amount that you owe the bank on your particular vehicle. You can either call your finance company or do some basic math by referencing your sales contract. As you pay on your car loan, this amount goes down.
If trading in a recently-bought car, you’ll need to ensure that your trade-in value is close to or exceeds your total amount financed. Otherwise, you’ll have to pay the difference.
For example, if you owe $30,000 but your vehicle is only worth $25,000 on trade-in, you’re going to have to account for that in the math because that $5000 will need to be paid or added into a NEW loan.
IS GAP INSURANCE WORTH IT?
Gap insurance can prevent you from making payments on a totalled car, but is gap insurance worth it? We break down what gap insurance is, if it’s worth it, and more - simply and with plenty of examples.
How to trade in a car if you’re upside-down on it
When a car is worth less than the loan value, it is referred to as being “upside-down”. The reality is that most people are upside down on their car loans and this can make trading it in a bit tough - but there are some options.
Most car loan companies will allow you to add some, if not all, of the “upside-down amount” into a loan for another vehicle. The challenge comes when the upside-down amount is excessive which, depending on your situation, could be extreme.
You also have the option of throwing some cash into the pot to cover this differential.
The easiest way to find the best deals on used cars
Looking for something to replace your current ride? The easiest way to find a great car at a great price is CoPilot Compare, the search engine for nearly-new cars.
Tell us the model you’re looking for and we’ll break down how much you save buying used vs. new. The best part? CoPilot searches all the dealerships in your area, then analyzes how good of a deal the listing is and how much it matches your preferences.
The best listings in your area get delivered to you in a curated, personalized list - no more scrolling through hundreds of nearly-identical listings looking for the best deals.
