How does trading in a financed car work?

Trading in a financed car involves selling the vehicle to a dealership while still owing money on the loan. The dealership will assess the car's value and offer you a trade-in amount, which is often applied towards the purchase of a new vehicle. If the trade-in value exceeds the loan balance, you can use the excess as a down payment; if it's lower, you’ll need to pay the difference or roll the remaining balance into your new loan. It's important to understand the financial implications, as this could affect your new loan terms.