22 October 2020 12:19 pm / Road Trip Drivers Buy a Car Finance a Car

Vehicle Trading 101

If you haven’t paid off your vehicle but want to trade it in for a newer model, don’t feel like you’re locked in forever. The age old like elementary school rules of no-takesies-backsies does not apply here. In fact, most dealerships are more than willing to work with trade ins, even if your current vehicle isn’t completely paid off.

Sometimes we just need to mix things up. A little change never hurt nobody. Like a pair of socks after the gym, growing a mustache, or switching up your car game, change can feel good. And whether it’s because your car doesn’t suite your lifestyle needs, requires too much upkeep, or you simply crave something that is entirely different, trading in your car is a viable option.

Just keep these things in mind before you make the big decision to trade.


When you trade in your car, you’re actually selling the car to the dealership for an amount they offer. It’s like the Price is Right, only without you winning a prize or getting to spin a wheel. Dealers use a variety of valuation methods, but often fall back on car publications to factor the trade-in value of your vehicle; this is how an offer is made and extended. For instance, if you have paid off your vehicle, the dealer considers the entire value of the car as equity and that amount is applied toward the purchase price of your new car, or in some cases you can choose to take back all or part of the value of your trade as cash in your pocket.

Negative Equity

If you owe more on your car than it is worth, dealers consider this condition “negative equity”; some dealerships may refer to this condition as being upside-down, which sounds scary, but trust us, it’s all going to be okay. In a negative-equity condition, you won’t be able to pay off the balance of your loan even if the dealer offers the full value of your car. If you owe $15,000 on your trade-in and it is worth $10,000, for example, you would have $5,000 of negative equity in your vehicle. It’s the price you pay for wanting an upgrade.

Payoff Process

If you finance the vehicle you purchase, dealers typically work equity, positive or negative, into the agreement. Positive equity means credit (woo!) toward the final price of the new car; negative means you may have to finance more than the price of the new car to cover both the new car’s value and the remaining balance after your trade-in (less woo). But! It’s all worth it if it means you get a better car for your commute, lifestyle, and weekend.

Get approved today.

Join thousands of Canadians who have trusted BC Drive.