Though it’s a little more complicated than selling or trading in a car you own outright, it is possible to trade in a vehicle that still has a loan. If you decide to trade in your current car before you pay it off, be prepared to do a little bit of work upfront so you are ready to move forward when you get to the dealership.

Depending on the amount left on your loan and the value of your car, you might owe money or get money back that can be applied to the new car. For this reason, it’s important to determine your vehicle’s trade-in value and your equity.

How Does Vehicle Equity Work for a Trade-In?

When you first bought your car, you likely took out a loan that you have been paying off every month since. As you make monthly payments you build your equity (the dollar amount you actually own).

Unfortunately, cars age and decrease in value each month, even as your equity increases with each subsequent loan payment. If you take care of your car, stay on top of your monthly auto loan payments and the demand for used cars is high, then your equity should still enter positive territory relatively quickly.

Once you are ready to trade in that vehicle, you’ll be faced with one of two scenarios:

• You have positive equity which means the car is worth more than what you still owe on the loan. The difference between your equity and the remainder of the loan can then be applied directly to your next vehicle purchase, lowering the amount of money you will need to borrow and helping you get a better interest rate.
• You have negative equity which means your auto loan is “underwater” or “upside-down.” This happens when your car is worth less than what you still owe. In order to trade in a vehicle with negative equity, you will have to pay off the difference.

For example: You bought a car for $20,000 and you financed $18,000 of it. The vehicle is valued at $12,000 when you decide to sell, but you still owe $13,000 on your auto loan. You’ll need to sell the vehicle for $12,000 and pay an additional $1,000 to clear the loan.

Conversely, if the same scenario occurs but you only owed $3,000 on your auto loan when you decided to sell, you would have $9,000 of equity you could put toward your next vehicle purchase. 

How Do You Pay the Difference if Your Auto Loan Goes Underwater?

If you’re considering a trade-in and your auto loan is upside-down, there are options to pay off negative equity.

1. Delay the trade-in until your car is paid off or once you are no longer underwater.
2. Pay the difference between what’s left on your loan and what the dealer offers for your trade-in. This is typically done with cash or by taking out another loan.
3. Roll over what you owe into your new car loan. Although this option is often the most convenient, it will result in you being immediately upside-down on your new auto loan. When you add the difference, you increase the new loan amount and typically pay more interest over time.

Do You Really Need to Know Your Trade-In Value?

When it comes to pricing your trade-in, take the time to do some research yourself. The team at Easterns Automotive would be happy to give you a fast estimate on your vehicle’s sale or trade-in value.

When it is time to trade in or sell your car at Easterns Automotive, we will conduct an appraisal and extend a firm offer.

What Will You Need to Trade in a Car with a Loan?

When you decide to trade-in a vehicle that still has a loan, the dealer will take over the loan and pay it off. To successfully trade in your old vehicle, you would negotiate the terms of your new auto loan and transfer your old vehicle’s title over to the dealer.

Ensure you have the following paperwork and materials ready when trading in a financed vehicle:

• Driver’s license
• Proof of insurance
• Vehicle registration
• All keys and key fobs for the vehicle
• The loan information (account number and payoff amount)
• Trade-in value based on your research

Get an Honest Trade-In Offer at Easterns Automotive

If you’ve tried other dealerships in Virginia, DC and Maryland and you weren’t happy with their trade-in offers, Easterns Automotive is here to help. We have a reputation for providing honest appraisals you can trust. It’s one of the reasons we have a 97 percent customer approval rating.

Once you accept our trade-in offer, we will deduct that amount from the new auto loan and take care of the rest. Stop by one of our locations or give us a call at 877-867-0641 to learn more.

The used car buying process can feel intimidating, especially when it comes to financing. It can be easier to focus on things like the color, make or model rather than the most irksome aspect of buying a car — how we plan to pay for it.

Perhaps you’ve saved up enough cash to purchase the vehicle outright, greatly simplifying the payment process. Most Easterns Automotive shoppers aren’t in that position. In many cases car buyers come to us with just enough to make a down payment.

Qualifying for an auto loan in the Washington D.C. and Baltimore areas will require you to approach a lender(s) or dealership with a multitude of paperwork and documentation. Lenders will need to confirm things like your identity, employment, credit score and income before they can offer you a car loan.

What Materials Do You Need to Apply for an Auto Loan?

1. Proof of identity (i.e., driver’s license or government-issued I.D.)
2. Proof of income (i.e., bank statements or pay stubs)
3. Credit and banking history
4. Proof of residence (i.e., utility bill or mortgage statement)
5. Vehicle information (i.e., purchase price and VIN number)

Where Do You Apply for an Auto Loan?

There are a number of lenders in DC, Maryland and Virginia who can offer you a loan to finance a used car purchase. When applying for auto loans, some car buyers will shop around for lenders until they find the best offer.

Common used car loan providers include:

• National banks
• Local community banks or credit unions
• Online lenders who specialize in auto loans
• Dealerships

What Is Pre-Qualification Versus Pre-Approval?

Pre-qualification is an estimate of the loan and rate you are likely to get based on the limited personal information and credit history you provide to a lender. A pre-qualification only requires a soft credit pull and is not an actual offer to fund your used car purchase.

Pre-approval is when a lender reviews your credit report to determine the estimated loan amount you’re approved to borrow and the interest rate you’ll be charged. A pre-approval does require a hard credit pull in order to provide a more accurate offer.

It’s important to note that neither will guarantee the approval of your auto loan, but both can be useful for planning and budgeting your used car purchase. If you want to impress a dealer or seller, getting pre-approved demonstrates your ability to obtain financing and shows you’re serious about buying the car.

What Affects the Approval of Your Auto Loan?

If you’re planning on financing your used car, you might be wondering what it takes to qualify for a car loan. If you haven’t had credit cards or loans in the past, you may have a harder time getting a loan.

Don’t lose hope — it’s not entirely impossible to get approved for a loan even if your credit isn’t great. In most cases, you should be able to find a lender willing to offer you a loan, but it may have a higher interest rate.

There are some steps you can take to increase your chances of being approved if your credit isn’t great:

• Save for a larger down payment
• Show proof of a steady job and income
• Ask a trusted friend or family member with good credit to be a co-signer/co-borrower

If you have been denied by a bank or lender in the past, don’t let that discourage you from buying a car. Easterns Automotive helps used car buyers in DC, Maryland and Virginia qualify for financing, no matter their credit history.

Apply For Used-Car Financing in DC, Maryland and Virginia

When you shop at Easterns Automotive, we handle the financing for you. You don’t have to worry about your credit history or getting third-party pre-approval when you apply for an auto loan through us.

At Easterns, we strive to get you the financing you need to purchase the car you love. Browse our extensive pre-owned inventory in Maryland, DC and Virginia or visit one of our dealership locations today.

Car shopping can be exciting yet nerve-wracking. Between financing and finding the perfect car to fit your lifestyle, there are a plethora of decisions you’ll be expected to make when buying a new or used vehicle.

A vehicle is a big purchase you’ll use on a daily basis and will ideally keep for several years (or more), which is why it’s so important to feel confident in your choice. While it never hurts to browse a vehicle inventory online or walk through a dealership lot to learn about your options, it’s important to determine the answers to some key questions before making a final purchase decision.

Does A Vehicle’s Practicality Matter?

Your next car is likely to serve a specific purpose, like getting you to work, hauling your kids to school and extracurricular activities or running errands. Think about what that purpose is and how you plan to use the vehicle when deciding what type of car is more practical.

• Will you be commuting to work or puttering around town?
• How much space will you need to transport family or equipment?
• Will you need to tow a boat or trailer? 
• Do you drive off-road?
• Are local streets narrow and traffic heavy?
• Will the vehicle need to fit in a garage or driveaway?
• Do you anticipate spending a lot of time in the car?

What Is Your Ideal Budget?

Most car buyers in DC, Maryland and Virginia will likely look at financing their vehicle purchases. Applying for an auto loan means you’ll be expected to make regular monthly payments on your new car. Make sure those monthly payments are within your budget.

We are all guilty of loving the latest and greatest cars on the market. Just remember that they aren’t the most wallet friendly. Unless you’re planning to put a sizeable down payment on your new car purchase, you may want to consider a used vehicle. Buying a used car can help minimize your monthly car payment and allow you to purchase a nicer model than you could otherwise afford buying new.

Oftentimes, if you buy from a dealership, you can expect the certified used car you purchase to be in near-showroom condition. Not only are you getting a quality vehicle that’s been serviced by the dealer but you’re getting it at a fraction of the price of a brand-new car.

Are You Planning to Trade-In Your Current Vehicle?

If you are ready to part with your car and upgrade to something more reliable, trading in your old vehicle is a way to take care of everything all at once. When you buy from a dealership, you can apply your trade-in toward the purchase of your new car. The more money you can put down, the better your interest rate and the less money you’ll need to take out on an auto loan.

The team at Easterns Automotive can provide you with a fast and fair trade-in quote if you decide to sell your current car or trade it in.

Would You Rather Buy or Lease the Vehicle?

When you purchase a vehicle to own, you are financing the entire cost of the car (minus any down payment or trade-in). When you lease a vehicle, you are paying for the duration you have the car and the mileage you put on it. 

If you’re not sure which route would work best for you, ask yourself these questions:

1. Do you drive a lot? Leased vehicles usually have a limit on how many miles you can drive within your lease term. If you go over that limit, you typically pay additional fees.
2. Do you anticipate any major life changes within the next couple of years? If you plan on growing your family, you may want to consider getting a vehicle that will work for you during those important life changes. There are often fees involved if you decide to terminate your lease early.
3. Do you take care of your car? When leasing a vehicle, you are expected to maintain it. If you return a leased car in bad shape, you may be charged additional fees.

Although most car shoppers typically associate leasing with new cars, some pre-owned dealerships, like Easterns Automotive, allow car shoppers to lease used vehicles. Contact our team to learn more about leasing a high-quality pre-owned car, truck or SUV.

Buy or Lease Your Next Vehicle at an Easterns Automotive Dealership in Washington D.C. or Baltimore

When you’re ready to buy or lease a pre-owned vehicle, Easterns is here to help. We make financing and leasing easy and offer fair trade-in values.

At Easterns Automotive, we strive to offer our customers a personalized car buying experience. Shop online, in person or both by browsing our inventory online or visiting one of our locations in the Washington D.C. and Baltimore areas.

Even if your credit is less than perfect, we are committed to finding you a great auto loan. Learn how we can help by calling us at 877-867-0641.