Dealerships that will pay off your trade no matter what you owe

When it comes time to trade in your vehicle, the process can be both exciting and stressful. One of the biggest concerns for many car owners is whether their current loan balance will be a stumbling block. You’ve likely seen or heard advertisements from dealerships claiming, “We will pay off your trade, no matter what you owe!” This can sound like a dream come true, but it’s essential to understand what this really means and what to watch out for.

Understanding How Trade-In Payoffs Work

When a dealership says they will pay off your trade, they are essentially offering to cover the remaining balance on your current auto loan so you can purchase a new vehicle from them. This offer can be particularly attractive if you’re upside down on your loan, meaning you owe more on your car than it’s worth. However, there are several factors to consider:

1. Rolling the Negative Equity: If you owe more on your vehicle than its trade-in value, the dealership will likely roll the negative equity into your new loan. For example, if you owe $15,000 on your current car but the trade-in value is only $10,000, the remaining $5,000 will be added to the loan for your new car. This means you’ll be financing both your old debt and the new vehicle, which can result in a higher monthly payment and potentially more interest paid over time.
2. Higher Interest Rates: Since you’re now financing more money, including the negative equity from your trade-in, the dealership may offer you a higher interest rate to offset the risk. This is something to be mindful of, as it can significantly increase the overall cost of your new loan.
3. Longer Loan Terms: To make the monthly payments more manageable, dealerships may extend the term of your new loan. While this can lower your monthly payment, it also means you’ll be paying for a longer period, which can lead to paying more in interest over the life of the loan.
4. Sales Tactics: The promise to pay off your trade no matter what you owe is often a sales tactic to get you into the dealership. While it can be a genuine offer, it’s important to be aware that the terms may not always be in your best financial interest. Always read the fine print and ask questions about how the dealership plans to handle your negative equity.

Tips for Trading In Your Vehicle

Before heading to a dealership that offers to pay off your trade no matter what you owe, consider the following tips:

1. Know Your Vehicle’s Value: Use online tools like Kelley Blue Book or Edmunds to determine your car’s trade-in value. This will give you a realistic idea of what your vehicle is worth and help you negotiate with the dealership.
2. Understand Your Loan Balance: Contact your lender to get the exact payoff amount for your current loan. This will help you understand how much negative equity you may have.
3. Shop Around: Don’t settle for the first dealership that offers to pay off your trade. Shop around and compare offers from different dealerships. Some may offer better terms or more for your trade-in.
4. Consider Paying Down the Loan: If possible, consider paying down your loan before trading in your vehicle. This can reduce or eliminate negative equity, putting you in a stronger position when negotiating with the dealership.
5. Read the Fine Print: Always read the details of any offer carefully. Understand how the dealership plans to handle your negative equity and what the terms of your new loan will be.

The Bottom Line

While the promise of a dealership paying off your trade no matter what you owe can be tempting, it’s important to approach the situation with caution. Understanding the potential implications of rolling negative equity into a new loan, the impact on interest rates, and the overall cost of financing is crucial. By being informed and prepared, you can make a decision that best fits your financial situation and avoid potential pitfalls.