Trading in your old car as a down payment lowers the amount you're financing on your next auto loan. And, a lower loan amount could help you qualify for a car loan if you have bad credit. But what if the car you're driving isn't in your name? Here's what you need to know.
Trading In Someone Else’s Car
If your name isn't on the car's title, even if you're the primary driver, you're not the owner, and can't trade in the vehicle. However, the owner can trade in the car themselves, or sell you the vehicle you've been driving. Once you own it, it's yours to do with as you please.
If there's still a loan on the car the lender is listed as the lienholder on the title and you can't do anything with the vehicle until the loan is paid in full. Once the vehicle is paid off, the owner is sent a release of lien letter, and/or the title. This needs to be done before the current owner sells you the car in a private sale.
Once You Own the Car
As the owner of a fully paid-off vehicle, you can trade it in as all or part of your down payment on another vehicle. But, as a bad credit borrower, you may face some stipulations, such as length of ownership. So, be sure to get all the details before heading to the dealership.
The trade-in process is pretty simple when you get down to it. Just bring the car to the dealer for an appraisal, and since you don't owe anything on the car, the whole amount of value can be used to offset the cost of your next auto loan.
States vary in their requirements when it comes to selling or trading in a vehicle. Additional documents also have to be completed, depending on your state, such as an odometer disclosure and bill of sale. Some states include these on the title, as well. Again, your dealer is likely familiar with this process and can walk you through it.
ACE Tip: Be sure to shop around for the dealership that's offering the best deal on your next car, as well as one that's offering a decent amount for your trade. If you rate shop within 14 days all hard inquires on your credit count as just one.
Finding a Dealership
If you’re looking for a dealership to trade in a vehicle, we want to help with that. At Auto Credit Express, we help bad credit borrowers find dealers with special finance departments that work with subprime lenders. These lenders finance borrowers with less than perfect credit scores.
To get connected to a dealership near you, simply fill out our auto loan request form, and we’ll get to work!