Trading in a car with a balance on it is often a costly undertaking, though it can be done. You will still be financially responsible for the outstanding balance on the loan. However, a new loan that incorporates the old one can result in more financially advantageous terms, particularly if your new loan carries a lower interest rate.

Step 1

Find out the current value of your vehicle using a site like Kelley Blue Book or This gives you greater negotiating power. For example, if you owe $5,000 on your car, but the trade-in value is $6,000, that extra $1,000 can be factored in when negotiating a price on a new vehicle.

Step 2

Decide how much you want to spend for a new car, factoring in the outstanding balance on the old one. For example, if you owe $5,000 on your current car and can only afford payments on a $20,000 loan, you’ll have to look for a new car with a price tag of $15,000 or less. This factors in the car price plus the outstanding loan balance you’ll be tagging on to your new loan.

Step 3

Tell the car salesperson you’re working with that you’re carrying a balance on your existing vehicle that you want to roll into a new loan. This will help the dealership’s finance department when it comes time to qualify you and negotiate your loan.

Step 4

Stick to your guns and be firm when maintaining your financial objectives. Be prepared to walk away if you can’t reach a price you’re comfortable with.