Beware if You Owe Money on Your Trade-In
Usually everything goes smoothly, but be aware that you're putting yourself at risk.
You're liable for the outstanding debt and if the dealer doesn't pay it off, you're the one that's going to have to suffer the consequences.
I've heard a lot of horror stories from people who bought a new car and thought the dealer had paid off the loan on their trade-in. A couple of months later, they get a call from the lender asking for payment.
The worst case scenario is when a dealer goes out of business and they didn't pay off your loan. You could be fully liable for the payment.
The best way to protect yourself from this scenario is to pay off the loan yourself. Don't rely on the dealer to do it for you.
If need be, sell the car to a private party and use the sales proceeds to pay off the loan.
If you insist on trading in when you still owe money, have the dealer agree in writing that they will pay off the loan within 10 days or else the deal is off. If they refuse, don't do it.
Also make sure you sign a Payoff Authorization document. This allows the dealer to pay off your vehicle and have the title sent to them.
Follow up with the dealer and call your lender to make sure the loan has been paid off within 10 days.
3 Steps Every Car Buyer Needs to Take to Save Maximum MoneyThe key to getting the best deal is to gather price or lease bids from as many local dealers as possible. Then shop that best price around until no one can beat it. Here are the steps:
Step 1 Get Prices From My Trusted NetworkSelect the vehicle you're interested in to see if there are local dealers in my network who will provide you with their best upfront price. You will get direct access to an internet sales manager who you can further negotiate with online (no need to visit dealership).
Step 2 Get Prices From TrueCar / CarsDirectTrueCar, and CarsDirect are my top 2 online price quote recommendations. These services show you pre-negotiated prices from dealers closest to you - and the deals are usually pretty decent. But remember, you can still negotiate further.
Step 3 Complete my ChecklistFollow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid