Trading in a vehicle while financing a new one can sound like several financial transactions piled on top of each other. In some ways, that's exactly what it is. You've got a vehicle with a value, possibly a loan with a balance, another vehicle you're buying, and financing to arrange for whatever remains. Fortunately, none of this requires advanced mathematics. For drivers around Cleburne looking at a new Chrysler, Dodge, Jeep®, or Ram vehicle, the process becomes much easier once you separate it into 6 steps.
Step 1: Find Out What Your Current Vehicle Is Worth
Before discussing a trade-in, get a reasonable idea of its market value. Online valuation resources such as Kelley Blue Book can provide an estimate based on information including mileage, condition, equipment, and the market. An online estimate isn't necessarily the amount a dealership will offer, since the vehicle still needs to be physically evaluated. Be accurate when describing its condition. Calling a truck with 140,000 miles, a dented tailgate, and tires approaching replacement “excellent” won't make those things disappear when somebody walks around it. The goal is simply to arrive with a useful reference point.
Step 2: Bring the Paperwork
A missing document has an impressive ability to turn a straightforward transaction into an unnecessarily long afternoon. Bring your driver's license, current registration, and other documents requested by the dealership. If you own the trade-in outright, you'll need the appropriate ownership documentation. If there's still a loan, obtain current payoff information from the lender. Requirements can vary according to the transaction and your circumstances, so ask the dealership what you'll need before arriving. Ten minutes spent gathering documents at home beats discovering halfway through the process that something important is sitting in a kitchen drawer.
Step 3: Work Out Your Equity
This is the important bit. If the dealership values your vehicle at more than your current loan payoff, you have positive equity. That difference can generally be applied toward the new purchase, reducing the amount that needs to be financed. If the payoff is higher than the trade-in value, you have negative equity. For example, owing $20,000 on a vehicle valued at $16,000 leaves a $4,000 difference. Depending on lender approval and the structure of the transaction, that amount may potentially be included in the new financing. Doing so increases the amount you're borrowing. Know this number before concentrating on the new vehicle.
Step 4: Compare Financing, Not Just Payments
Once you know what the trade-in contributes, you can start evaluating financing options. Dealership financing may include access to multiple lending options and manufacturer-backed programs, depending on the vehicle and applicant eligibility. Available programs and incentives can change, so confirm current terms instead of assuming an advertised offer applies to your transaction. Compare the APR, loan term, amount financed, monthly payment, and projected total cost. A low monthly payment can look appealing because it is the number you'll see most often. But extending the loan across additional years can increase the time you're carrying debt and may increase total interest paid. The smallest monthly number isn't automatically the cheapest loan.
Step 5: Read the Whole Deal Before Signing It
Now put the pieces together. Review the vehicle purchase price, trade-in allowance, existing loan payoff, equity or negative equity, down payment, amount financed, APR, loan length, monthly payment, and other applicable charges. If something doesn't match what you discussed, ask about it. If you don't understand a line on the paperwork, ask what it means. This isn't being difficult. You're agreeing to make payments for years. Spending another 5 minutes understanding the agreement seems entirely reasonable.
Step 6: Finish the Trade and Take the New Keys
Once you've agreed to the purchase and financing terms, the dealership can complete the required paperwork for the new vehicle and trade-in. Depending on your situation, this can include financing documents, title paperwork, and arrangements for paying off an existing loan on the vehicle you're trading. Before leaving, remove personal belongings from the old vehicle. Check the glovebox, center console, cargo area, garage-door opener, and anything paired or stored in the infotainment system. Trucks seem capable of accumulating 4 years' worth of possessions without anybody noticing.
Know the Numbers Before You Pick the Truck
A trade-in can make financing another vehicle easier, especially when you have positive equity. The trick is understanding every number separately before looking at the final monthly payment. SouthWest Chrysler Dodge Jeep Ram can help Cleburne-area shoppers evaluate a trade-in, explore financing options, and compare new Chrysler, Dodge, Jeep®, and Ram inventory. Once the numbers make sense, find the vehicle that suits the job and schedule your test drive online. Then you can hand over the old keys knowing exactly what the new ones cost.
