How does a trade in work?
I have a 2013 Toyota Corolla that I recently financed in December of 2012. I was thinking of trading it in for another car. Could anyone explain how the process works? I know there are words such as equity and such. Thanks in advance.
Comments
You won't be able to trade that car in unless you own it free and clear. Someone will have to pay off that note on the car - and that someone will be YOU. A car dealer who says they will pay off your note isn't being 100% truthful. The dealer will get the money from you and pay off the note with your money, not his.
And you won't be able to finance the new car for more than the selling price. This is how some of these "we'll pay off your car for you" works. They simply add that cost to the price of your new car and finance both into a single note. And a a bank or credit union isn't going to finance that. But the dealer, if they have the cash, will. For example, you'll be financing a $20,000 car with a $35,000 note. They just added what you owed on the Toyota to the cost of the new car. They'll make a ton of money off the interest and the interest rate will be high because of the risk.
You won't get an even trade either. The dealer will want to make money, they need to make money and they WILL make money on your swap.
you will need to be able to trade it in for at least what you owe on it, and the cost of the new car needs to be more than your trade in. they aren't going to do an even swap. they will take your car in trade and pay it off. any extra money given for the trade in after the car is paid off will be used as a down payment on the new car.you will have a new loan for the new car.