A trade-in conversation can move quickly toward the next vehicle and its payment. Before you get there, pause for two numbers: what your current vehicle is worth in the proposed deal, and what it would cost to pay off its loan.
Those numbers are not necessarily the same.
1. Request a current payout figure
Ask your existing lender for the amount required to settle the loan and how long that figure is valid. Do not rely only on the balance from an older statement.
Keep the payout information with your vehicle paperwork so you can compare it with the proposed transaction.
2. Get the trade-in offer in writing
An online estimate can be a useful starting point, but it is not a confirmed offer for your vehicle. Condition, mileage and the specific transaction can affect what you are offered.
Ask for the trade-in amount to be shown clearly, separately from the next vehicle’s selling price and other charges.
Understand the gap
Here is a hypothetical example, not a Kootenay Auto Loans quote:
- Current loan payout: $18,000
- Written trade-in offer: $15,000
- Difference: $3,000
That shortfall is called negative equity. It does not disappear because you choose another vehicle.
If an offer proposes adding the shortfall to a new loan, ask exactly how that changes the amount financed and total cost. Whether that arrangement is available depends on the lender; it is not automatically the right choice for you.
Compare more than the replacement payment
Request an itemized proposal showing how the existing loan is handled. Check the new vehicle price, trade-in allowance, any shortfall, taxes, fees, optional products, term and borrowing cost.
A payment that looks similar to your current payment can still describe a very different commitment.
Give yourself permission to wait
Replacing the vehicle now is not your only option. If it remains suitable and reliable, keeping it longer may be worth considering. Compare the cost of keeping it with the complete cost of changing vehicles, including likely maintenance needs.
You do not have to decide during the first conversation.
Want help understanding the figures in a proposed vehicle purchase? Contact Steve at Kootenay Auto Loans: 250-464-1572 or steve@kootenayautoloans.com.
Illustration only. All amounts are Canadian dollars. Financing is subject to lender approval and terms.