Are you getting ready to buy a new car and have an older one to trade in? If so, you might have questions about how auto loans work, and you should find the answers before you start shopping for a new vehicle. Here are several things you should know about how auto loans work if you are ready to trade in your old car.
Visit a Dealer That Accepts Trade-Ins and Has Cars You Like
The first thing to know is that you must go to a dealer that has cars you like and accepts trade-ins. Almost all dealerships accept trade-ins, but there might be some that do not. All dealers also sell vehicles, but you might not like any of the cars you find at some dealers. Therefore, you should shop around online before visiting a dealership to make sure they have some vehicles you like.
Understand How a Trade-In Works When You Do Not Have a Loan on It
When you trade in a vehicle, you must give the dealership your car and choose a newer one to purchase. If you do not owe money on the car you want to trade in, you should bring the title with you. You must sign the title over to the dealership if you trade it in.
The dealership will appraise your vehicle and make an offer to you. The offer they make is what your car is worth to them. The amount they offer will not be the true value of the car. The dealership must sell the car and make a profit on it, so they will offer less than its true value. The amount they offer will reduce the amount you owe on the new car you purchase.
Understand How a Trade-In Works When You Have a Loan on the Vehicle
If you owe money on the car you are trading in, you will not have the title to the vehicle. Instead of giving the lender the title, they will have to look up the balance you owe your auto lender, and they will pay off the balance. They will receive the title to the car when they do this. If they offer more than you owe on the vehicle, the difference will reduce the amount you must pay the dealer for your new car. If you owe more than the car's value, you will have to pay the extra to the dealer when buying your new car.
Now that you know what to expect when trading in a vehicle, you can start shopping for a car and a vehicle loan. If you have questions about these things, talk to an auto lender today.