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What happens if I still owe money on the vehicle I want to trade-in?

If you still have a loan for the vehicle you plan to trade in, there are steps you should take to carefully consider whether to take on new debt for another vehicle before you have paid off your old vehicle.

These are the steps you should take:

  • Find out how much you still owe on your current vehicle. Get the “payoff amount” from your current lender. This is the amount it will take to pay off your existing loan, and it may be different from any outstanding balance listed on your statement or coupon book. This difference may be because of a prepayment penalty or the way interest is calculated;
  • Research your trade-in’s value, so you will know if the amount you still owe on your trade-in is less than it is worth, make sure during any negotiations that you consider whether you are getting fair value for your trade-in and you are able to fully pay off the old auto loan.
  • Decide if you are going to pay off your existing loan now, wait until you pay off your old auto loan before you borrow for another vehicle, or include the amount that you still owe on your current vehicle in your new auto loan;
  • If you owe more on your current vehicle than it is worth and you roll the balance of your existing auto loan into your new auto loan, this could make the new auto loan much more expensive. Your total loan cost will be higher because you will be borrowing more than just the price of your new vehicle.

If you decide to roll the balance of your existing auto loan into your new loan:

  • Find out which department of your current lender to contact in order to confirm that, once you have your new loan, your old loan has been paid off.
  • After about a week, use the contact information to find out if your old loan has been paid off.
  • If your loan has not been paid off, contact the lender. If, after reasonable efforts, your loan has still not been paid off, you may want to consider submitting a complaint to the Federal Trade Commission , or with the CFPB online or by calling us toll-free at (855) 411-CFPB (2372). You can also tell us about your experience without submitting a formal complaint. You can also contact your state attorney general .

Tip: Research your trade-in’s value so you know whether the amount you still owe on your trade-in is more or less than it is worth. Then during any negotiations you can decide whether you are getting fair value for your trade-in and whether you are able to fully pay off the old auto loan. If your auto loan payoff amount is more than the dealer is willing to give you for your trade-in then you will still have to pay off what you owe on your old vehicle even if you trade it in. You should consider whether it makes sense to go through with the new purchase, because in this circumstance your new loan will include the amount you still owe from your old vehicle and the amount you are borrowing for your next vehicle. Be very careful to make sure you understand the total cost of the new loan, the monthly payments, and the loan term (in months), before you agree to anything.

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