PriceProtect™
DriveShield™
GarageGuard™
Services
Insurance
Car Insurance
Compare Car Insurance with Jerry
Jerry’s Expert Advice
Car Insurance Estimates
Home & Renters Insurance
Renters Insurance
Loans
Car Loan
Compare Car Loans with Jerry
Jerry's Expert Advice
Car Loan Guides
Repairs
Car Repair Estimates
Repair Estimates for Popular Services
Advice
Read Car Content
Browse Jerry Car Advice
Check Out Expert Car QnA
Learn About How We Create Content
Jerry Data & Research
What happens when I trade my car in for a less expensive one?
What is the process for trading in a car for a cheaper one? I have a car financed right now, but the payments are too much. I want to trade in the car for a less expensive one to help save money.
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
The dealer will give you the trade-in
value
for the car. They would then apply this amount to the loan you currently have.What happens next will depend on the trade-in value of your car:
- If the trade-in value pays off the loan in its entirety: you might have some money left over that you can use as adown paymentfor thecar loanof the cheaper vehicle or you can take cash in hand.
- If thetrade-invalue is less than what you owe on the vehicle: the lender will pay off the loan, but the remaining balance will get rolled into the new loan on the cheaper car. This is what’s known as negative equity and something that you’ll want to avoid.
- If you owe nothing on your car, the entire trade-in value can go toward a down-payment on your new vehicle.
Pro tip: Only trade in the vehicle if you’re going to break even between the trade-in value and the price of the car. By doing so, you can avoid negative equity.
View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
Join 4M+ members in lowering their car insurance
You Might Also Be Interested
Read Advice From Car Experts At Jerry
What Others Are Asking
Browse More Content
Insurance for Your Car
Insurance in Your State
Easiest way to compare and buy car insurance
No long forms
No spam or unwanted phone calls
Quotes from top insurance companies
