This article is all about can we trade in a financed car? To know about it ion more detail read this article which everything related to a financed car and how to trade in with a right way.
WHAT IS A FINANCED CAR?
Financed car as you are aware is a car with an existing loan from banks or any other third-party and having a financed car can be beneficial as it helps in tax exemption and provide other benefits such as depreciation of vehicle. It is also important to plan about how to finance the car which can be quite risky if you make a wrong decision so let me help you with it.
HOW TO FINANCE A CAR IN RIGHT WAY?
According to financial advisor’s while considering to finance a car one should look at all the three factors like down payment of vehicle interest rate applicable and tenure of finance.
Here they come up with a rule of 20-4-10 which states that 20% of the vehicle's price should be paid as down payment and rest money should be divided in a loan with a tenure maximum of 4 years. The next important thing is that cost of running the car which includes
fuel cost , maintenance cost and loan amount should be less than or equivalent to your 10% of your annual income.
CAN YOU TRADE IN A FINANCED CAR?
Yes, you can trade in a financed car anytime but you have to ensure that your loan amount is paid off. In most cases loan amount is covered during a trade in the value of the vehicle but it depends on a variety of factors, including condition and age of vehicle.
HOW DOES A TRADE IN A FINANCED CAR WORKS?
1.) Firstly, find out how much you owe on the loan of the financed vehicle.
2.) Now get the estimate of how much the car is worth and what is an estimated price of the vehicle you have to trade in.
3.) After the estimation of the price, get the price inspected in person from a professional to know its actual price and worth.
4.) If trade in exceeds the value of the car loan this is known as positive equity and then the left over excess money can be used by you for a new vehicle or anything else.
EXAMPLE-
Suppose the price of trade is around $10000 and the amount you owe is around $6000. In this case the rest of $4000 can be used by you for your personal use or to buy a new vehicle.
5.) If trade in value is less than the amount you owe this is known as negative equity and then you have to pay the leftover amount or you can have a roll on that loan of a particular amount.
EXAMPLE-
Suppose the price of trade is around $8000 and the amount you owe is around $10000. In this case the rest of $2000 should be paid by you or sometime you can roll it on to your next auto loan.
