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How to Trade-in a Vehicle Under Finance in Canada

How to Trade-in a Vehicle Under Finance in Canada

Trade ins can form a valuable part of a new car purchase. They can reduce the amount you need to borrow significantly while also providing a convenient way of disposing of your old car. But what happens if you want to trade in a vehicle under finance?


Our auto loan team explains what happens.

Trade In a Vehicle Under Finance


The good news is that you can trade in a car with outstanding finance. As long as you tell the dealership that you have an Oakville auto loan outstanding and that you will need to settle that as part of the deal, it’s all good.


Before you go about trading in, you’ll need to find out how much you still owe.


Contact your current lender and ask for a settlement figure. This is how much you will need to pay the loan off in full.


Then get a value for your car to see whether you have positive or negative equity.


Positive equity is where the car is worth more than the outstanding finance. Negative equity is where you own more than the car is worth.


Visit other dealers to get a valuation or check like for like models online to get an idea of the value.


Doing the deal


Once you find a car you want, you can enter negotiations with the dealership. Use the evidence you have gathered to justify your required trade in price and negotiate a figure you’re happy with.


Keep the trade in negotiation separate from the new car negotiation. Some dealerships will try and hide one within the other by offering a higher trade in price and less of a discount on the new car. Or the other way round.


Keep them separate so you know exactly what’s going on.


Settle the old Oakville auto loan with the new


When you’re applying for a new auto loan, factor in the trade in price, the settlement figure for your current loan, the cost of the new car and any down payment you’re adding on top.


Roll all that into the new loan and make sure you’re happy with the loan term, the interest rate, the amount and the monthly payment. Once you’re happy, you can apply for the loan and close the deal.


Make sure the sales contract includes the stipulation that the dealership will settle your existing loan. If you prefer to settle it yourself, you can but otherwise, let the dealership take care of it.


Just make sure it’s in the contract. We have heard of dealerships promising to pay off outstanding finance and then the customer receiving a notice of non-payment of the old loan a month later. That’s not something we want happening to you!


That isn’t something Car Nation Canada Direct would ever do but it’s a good habit to get into in order to protect yourself.


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