Trading in your car??

Discussion in 'Community Discussion' started by todd2000, Jun 21, 2006.

  1. todd2000 macrumors 68000

    Nov 14, 2005
    Danville, VA
    Help me settle an argument im having with a friend.

    When you trade in a car that you still owe money on the dealer takes the value of your car, subtracts what you still owe, and that is the amount that you get for your trade right? It's as simpe as that correct? My friend is trying to convince me that I still ahve to pay the dealer back the money that they used to pay off my car, which makes no sense because they already subtracted it from my trade-in value.

    So to make an example using easy math, lets say my car was worth $10,000, and I still owed $5,000 on it. Then the dealer would give me $5,000 for my trade in, pay off my loan an that would be the end of it right? The only way I would have to pay the dealer anything for the trade would be if I owed more then the trade-in was worth right?
  2. Doctor Q Administrator

    Doctor Q

    Staff Member

    Sep 19, 2002
    Los Angeles
    Sort of. You would probably get $5000 from the dealer, who would pay off your $5000 loan. That's equivalent to them paying you $10000 and paying off your loan, and you then paying them back the $5000 they used to pay off the loan; it might look that way as they compute it but they won't really pay you and then have you pay them separately.

    But some car dealerships advertise that they will pay off your old loan if you buy a new car. They imply that they'll pay whatever you owe without deducting that cost from the rest of the deal. In your example, they'd supposedly pay you the whole $10000 (the value of the car) and pay off the loan balance (another $5000) themselves.

    But I don't believe those ads. There must be a catch to it, such as high fees, or perhaps they do this only if you buy at full price and finance the car with their high-priced loan company. Or perhaps it's limited to cars whose loans exceed their trade-in-value, so they pay off your loan but never pay YOU anything.

    Unless your friend is talking about one of these "pay off your loan" offers, I side with you in your argument.
  3. CorvusCamenarum macrumors 65816


    Dec 16, 2004
    Birmingham, AL
    Umm no. The dealer is going to lowball you as much as he can. He doesn't care how much you still owe, he just wants to get it from you for as little as possible so he can turn around and sell it for as much as he can get. YOU are still responsible for the unpaid car note. It's your signature and credit on the line, not the dealer's.

    What some [shady] dealers might do is "promise" to pay off your old car loan (get it in writing), but just roll that amount into the new car loan and so presto, you're paying off two cars instead of one. You'll come out much better if you just sell the old car yourself and pay off the note.

    If you still owe money on a car you shouldn't be thinking about trading it in anyway, and doubly so if you're upside down on the loan.

    Go here for lots of useful info
  4. stonyc macrumors 65816


    Feb 15, 2005
    I was just about to reference that site.

    Dealerships that offer loan-payoffs is one of the scams that the site explains, as well as other scams and tricks that dealers may pull that an informed car buyer should know about.
  5. Roger1 macrumors 65816


    Jun 3, 2002
    I just traded in a car, so I will try to explain it.
    I owed 7000 on my car
    The dealer gave me 6000.
    I bought a new car for 14000 (guess)
    I financed 15000 (14000 + 1000 still owed on old car)
    The dealer then paid off the 1000 balance, paying the off the car in full (6000 trade + 1000 financed)

    Oh, you do have to pay interest on the refinanced balance. That's where it gets expensive when you trade in a car, and have to go this route.

    Hope this helps
  6. NeoMac macrumors regular


    Feb 10, 2006
    Depending on how much you car is worth and how much you still owe on it determines if you will still owe the dealer. If you owe more on your car than it is worth you have "negative equity." The dealer will pay off the loan on your old car and you will have to pay the difference. If you owe less on you car than it is worth then the difference is what is applied to the new car loan.
  7. todd2000 thread starter macrumors 68000

    Nov 14, 2005
    Danville, VA
    Well first im not upside-down, my car is worth more then I owe. The only argument I seem to hear against trading in my car is the dealer MIGHT not pay off my loan as promised. As long as I get it in writing that they will pay off my loan there really shouldn't be any problems correct? What would be the problem trading a car you own money on as long as your not "upside-down" and the dealer pays off the loan on-time. My Aunt has done it with no problems.
  8. e²Studios macrumors 68020


    Apr 12, 2005

    I've traded in a few cars and never had a problem, You will have to sign over the car (A DMV form) and sign a form allowing them to pay off your old car note.

    I just bought a new car 10 days ago and traded in a car for it.

    The way it worked was pretty much as others had said

    It is your trade value say 10k minus what you owe say 5k, so you carry 5k to your new loan as a downpayment usually.

    so if the car you are looking at is 20000 then its 20000 minus the 5k for a financed total of 15000.

    Just be sure to call your old bank that carried your trade cars note, Mine was paid off less than 4 days after the deal was done :)

  9. todd2000 thread starter macrumors 68000

    Nov 14, 2005
    Danville, VA
    Thats pretty much what I figured, everyone is basically paranoid that the dealer won't pay the car off. But I trust them, I will still get it in writing, but im sure there will be no problem. As far as lo-balling me like CorvusCamenarum said, they already offered me the Blue Book value, which I looked up and it is a fair price, almost exactally what said.

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