Trading In a Car With a Loan or Negative Equity
Trading In a Car With a Loan or Negative Equity in Florida
Yes, you can trade in a car that you still owe money on in Florida. The key is comparing your lender's current payoff amount with your vehicle's trade-in value. If the vehicle is worth more than the payoff, you have positive equity. If you owe more than the vehicle is worth, the difference is called negative equity.
Subaru of North Miami can appraise your current vehicle and help you understand how an existing loan may affect your next purchase and financing. Start by finding out what your vehicle may be worth.
``` ```Can You Trade In a Car You Still Owe Money On in Florida?
Yes. Florida drivers can trade a vehicle with an existing lien to a dealership. The loan does not have to be completely paid off before you begin the trade-in process. What matters financially is the relationship between your vehicle's appraised trade-in value and the lender's payoff amount.
```Your situation will generally fall into one of three categories:
- Positive equity: Your vehicle is worth more than the loan payoff. The remaining equity can generally be applied toward your next vehicle.
- Break-even equity: Your trade-in value and loan payoff are approximately equal.
- Negative equity: Your loan payoff is higher than your vehicle's trade-in value, leaving a balance that still must be addressed.
The Florida Department of Highway Safety and Motor Vehicles states that consumers may bring a vehicle with an existing lien to a dealership for a sale or trade. An outstanding lien and negative equity, however, are two different issues: satisfying the lien does not make an equity shortfall disappear.
```Start With Your Payoff Amount, Not Just Your Loan Balance
Before evaluating a trade, request a current payoff quote from your lender. Your payoff amount can differ from the balance shown on a monthly statement because of accrued interest, fees, or other account activity. The Consumer Financial Protection Bureau recommends knowing both your payoff amount and your vehicle's trade-in value before deciding how to proceed.
```A simple calculation shows where you stand:
Trade-in value − loan payoff = vehicle equity
Example of Positive Equity
If your vehicle receives an $18,000 trade-in appraisal and your lender's payoff is $14,000, you have $4,000 in positive equity. That equity may be applied to your next vehicle transaction.
Example of Negative Equity
If your vehicle is appraised at $18,000 but your payoff is $21,500, you have $3,500 in negative equity. That $3,500 still needs to be accounted for as part of the transaction.
```What Happens to Negative Equity When You Trade In?
Negative equity does not simply disappear when a vehicle is traded. Depending on your circumstances and lender approval, there are several ways the difference may be handled.
```Pay the Difference
You may choose to cover some or all of the equity shortfall yourself. Reducing the shortfall means less of that existing debt needs to be considered in the financing of another vehicle.
Include the Shortfall in New Financing
A lender may approve financing that includes some or all of the negative equity from your current vehicle. Approval is not guaranteed and depends on factors including the new vehicle, amount financed, credit qualifications, down payment, and the lender's underwriting requirements.
Rolling negative equity into a new auto loan increases the amount being financed and can increase the total interest and overall cost of the new loan. Both the CFPB and Federal Trade Commission advise consumers to understand exactly how negative equity is being handled before signing a financing agreement.
Wait and Reduce the Loan Balance
If changing vehicles is not urgent, continuing to pay down the existing loan may reduce or eliminate the negative-equity gap. Review your loan agreement and speak with your lender before making additional payments to understand how they are applied.
```How Trading In a Vehicle Can Affect Florida Sales Tax
Florida provides an additional reason to consider a dealership trade-in. Under Florida Department of Revenue guidance, a registered motor vehicle dealer may deduct an eligible trade-in allowance from the taxable sales price when the trade and vehicle purchase occur as part of the same transaction. Applicable Florida sales tax and discretionary county surtax rules still apply.
```This tax treatment is separate from your loan payoff or equity position. Your trade-in appraisal, outstanding loan, financing structure, taxes, and other transaction amounts should each be reviewed individually so you know how the final numbers are calculated.
```A Clearer Way to Evaluate Your Trade-In
You do not need to guess whether you have positive or negative equity. Use these steps to establish the numbers before choosing your next move:
```- Request your current payoff quote. Contact your existing lender for the amount required to fully satisfy the loan.
- Get your vehicle appraised. Use Subaru of North Miami's trade-in tool to begin estimating your vehicle's value, followed by a vehicle appraisal as required.
- Compare value with payoff. This shows whether you have positive equity, are near break-even, or have negative equity.
- Review your available options. If there is negative equity, determine how much you can pay down and what financing may be available, subject to lender approval.
- Review the complete transaction before signing. Confirm the trade-in allowance, payoff, amount financed, loan term, APR, monthly payment, and how any negative equity is reflected in the agreement.
What Should You Bring When Trading In a Financed Car?
Having the right information available can make it easier to evaluate your trade. Bring or have access to:
- Your lender's name and auto-loan account information
- A current loan payoff quote, if available
- Current vehicle registration
- Your driver's license or other required identification
- All vehicle keys and remotes
- Your paper title if you possess one
- Any other ownership or lien documentation relevant to the vehicle
Florida uses both paper and electronic title processes, so the exact documentation required can depend on how your title and lien are recorded.
```Trade In Your Financed Vehicle at Subaru of North Miami
An outstanding loan does not prevent you from finding out what your vehicle is worth. Start with an appraisal, compare that value with your current payoff amount, and then evaluate your options based on actual numbers.
```Subaru of North Miami provides an online trade-in tool and auto financing resources for drivers in the Miami area. If your vehicle has negative equity, the finance team can review available financing options with you based on your individual transaction and lender requirements.
Ready to see where you stand? Value your vehicle online, then discuss your payoff and trade-in options with Subaru of North Miami.
Value My Trade Call Sales: 833-853-0927 Contact Subaru of North Miami
```Frequently Asked Questions About Trading In a Car With a Loan in Florida
```Can I trade in a car that I still owe money on in Florida?
Yes. A vehicle with an existing auto loan or lien can be traded in at a dealership in Florida. The dealership will need information about the loan payoff so the existing lien can be addressed as part of the transaction.
What happens if I owe more than my car is worth?
If your payoff amount exceeds your vehicle's trade-in value, you have negative equity. The difference must still be accounted for. You may pay the shortfall, potentially include some or all of it in new financing subject to lender approval, or wait and continue reducing your existing balance.
Can negative equity be rolled into a new car loan?
It may be possible, subject to lender approval and the details of the transaction. Adding negative equity to a new loan increases the amount financed and can increase your total borrowing costs.
How do I know how much negative equity I have?
Request your current payoff amount from your lender and subtract it from your vehicle's trade-in value. For example, a vehicle worth $18,000 with a $21,500 payoff has $3,500 in negative equity.
Does a trade-in reduce the taxable vehicle purchase amount in Florida?
For an eligible trade completed as part of the same transaction, Florida allows a registered motor vehicle dealer to deduct the trade-in allowance from the taxable sales price. Other tax and discretionary surtax rules may apply to the transaction.
Should I trade my car now if I have negative equity?
That depends on your payoff, trade-in value, available funds, financing terms, and need for another vehicle. Compare the complete cost of moving forward with the option of keeping your current vehicle longer and reducing the loan balance before deciding.
Financing is subject to credit approval and lender requirements. Including negative equity in a new loan increases the amount financed and may increase total finance charges and the overall cost of borrowing. Trade-in values are subject to vehicle appraisal, condition, mileage, equipment, market factors, title and lien verification, and other applicable criteria. Tax information is provided for general informational purposes and is not tax or legal advice. Consult an appropriate tax or legal professional regarding your individual circumstances.
