A vehicle trade-in is when you sell your used automobile to a dealer and have the money they pay deducted from the price of the new vehicle you desire. Trading in your car can come in handy when you wish to knock some money off the cost of your next vehicle. Although some people might not consider this their best option, it is undoubtedly an easy way to part ways with your current vehicle and get a new one without breaking the bank.
Trading in a Pre-owned Vehicle
When you trade in your vehicle at a dealership, the cost of the new car is reduced by the value of your trade-in vehicle. For example, the price of the car you want to purchase is $16,000, and the dealer values your trade-in at $6,000. It means you only have a net total of $10,000 to pay in cash or as a car loan.
When trading in your vehicle, it is important to do your research beforehand. You want to know the fair trade-in value of your vehicle so you can get the most towards your new purchase. This can be done by looking up the Kelly BlueBook value of your vehicle, or even a quick look on Google to see how much people are selling your vehicle for, in the same zip code. All these findings can be used as tools to determine the fairest value you can expect when trading in your vehicle. One small note, you can always expect to make more when selling privately versus at a dealership, but with that comes a lot more risk, which we will go over in another article.
If your credit score is bad, you might wonder if you can even qualify for another auto loan. Or maybe you’ve even been rejected several times because of your credit score. Does this mean this is the end of the road?
Can a Trade-In Help Me Even If I Have Bad Credit?
You’ve probably heard people say you can’t get a new car if you have bad credit. This couldn’t be farther from the truth.. Why? Because our lending team over at FA Financing has been helping credit-challenged individuals in San Diego get approved for auto financing for 20 years!
It’s no secret that getting an auto loan with bad credit isn’t an easy task. But the credit analysts at FA Financing have a wide network of lenders that they have worked with for years. They know exactly what the lenders are looking for, and how to structure your application so it doesn’t just make sense to the banks, but for you the consumer as well.
Life is full of ups and downs and lots of moments of uncertainty. FA Financing is aware of this and is always ready to help you get your next desired vehicle. This can be facilitated by trading in your current vehicle for a new one. It requires less work to trade in versus selling privately, and you end up paying less for your next vehicle.
How Can A Trade-In Help my Auto Loan Approval?
We are all aware of the impact a credit score has on our daily finances. Having strong credit enables us to live a might higher quality life, which unfortunately cannot be replicated when your credit score is low. However, an auto loan can be the quickest way to get your credit back on track, and your trade-in can greatly increase your odds for an approval.
If you have an equity trade-in, meaning you own the vehicle, or the vehicle is worth more than you owe the lender, it will put you in a much better position to get a new auto loan. By saying equity, we mean how much your current car is worth compared to the amount you still owe on it. For instance, if the current market value of your vehicle totals $20,000 and you still owe $15,000, we can say you have positive equity on your vehicle. On the contrary, if you owe more than your current car is appraised for, you will have “negative equity“, which makes it not impossible, but very difficult to get out of the current loan and into a new one.. It gets even better when you have fully paid off all payments because you will get the vehicle’s full value as equity that you can use. Essentially, equity is a good thing and means your trade-in brings value to the deal.
Why You Need A Down Payment?
You might wonder why you need a down payment since you’re taking a loan. We mentioned in a previous article the importance of the down payment, especially with subprime lenders, who work hand in hand with a dealership’s finance department. The down payment amount varies and depends on your credit, and the vehicle, but usually ranges between 10%-20% of the car’s selling price.
But what if you are strapped for cash? Well, that’s where the trade-in comes into play. Your old car will most likely cover the cost of the down payment requirement which makes trade-ins such a valuable asset.
If you have negative equity on your vehicle – meaning you owe more in the car than its value, then the trade-in won’t help you with the down payment. There are strategies around this, however, such as making extra payments (if you can manage it), saving up for a down payment to cover the negative equity, or even finding a cosigner. While you can use an online valuation service to get an estimate, the final deal lies between what you and the dealership agree to.
Work With us to Trade in Your Car
Overall, getting a car, even with bad credit, is more than possible with the right guidance. FA Financing is here to help you with our experienced credit analysts who put you on the path to getting in your next car. We’ll even help appraise your trade-in so you have an idea of the actual value! So whether you trade in your old car to purchase a new one, or you want to improve your credit, you can be sure that FA Financing has all the expertise you will need on your credit improvement journey. Contact us today to speak with one of our lending specialists to get approved for your next vehicle. Call today, drive today.
