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How Does Trading In a Financed Car Work?

For Santa Monica drivers that own a vehicle that’s currently financed with a loan from a financial institution, it is possible to trade-in that car and lease another new vehicle. However, there are some financial conditions that need to be satisfied first. You will need to:

  • Pay off Remaining Balance Owed on Current Loan – A trade-in loan that’s been paid off obeys different rules than a vehicle that is still carrying an owed balance.
  • Determine Negative Equity or Positive Equity: Is the vehicle that’s being traded in worth more than the amount owed (positive equity) on the loan or is it worth less (negative equity). Again, the process is different for each scenario.

Trading in a Financed Car With Positive Equity

Positive equity in a financed vehicle means its resale value is a higher number than the current outstanding amount on the loan. For Malibu drivers in situations like this, the difference is applied to the new leased vehicle as a “credit”. To find out if you have positive equity in your current vehicle, use our convenient online trade-in evaluator.

Trading in a Financed Car With Negative Equity

If your vehicle has negative equity, then it is worth less then the amount still owed on the loan, in which case the vehicle will be paid off with enough money to cover what is still owed. The difference between the two amounts is now owed to the new leasing dealer, which can be paid by taking out another loan, settling with cash or “rolling over” what is owed into the loan for the new leased car. Negative equity loans are sometimes referred to as “upside down” or “underwater” loans. 

Rolling Over Into a New Loan

“Rolling over a loan” happens when a vehicle with negative equity is sold and the difference between the vehicle’s value and what is owed on the loan is applied to a new lease. The new loan now is paying off what remained on your old loan in addition to the new loan in one monthly payment.

Get Vehicle Financing From Jaguar Santa Monica

When looking to upgrade your Pacific Palisades and Brentwood area driving experience, browse through our wide selection of new, pre-owned and used vehicles until you’ve found the ideal match. You can calculate your monthly payments online and if your question is, “can you trade in a financed car”, the professionals in our finance department are more than ready to help. Contact us today to get started!

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