Yes, you can. If you have positive equity on the car (as in it’s worth more than what you currently owe), you can trade it in easily. The dealer will purchase the car and pay off the loan, then they’ll put what’s left toward the new vehicle price, giving you a major advantage. If you have negative equity on the car (as in it’s worth less than what you currently owe), the dealer may still buy the car and pay off the loan, but the difference will be rolled into your new car loan — meaning you’ll still need to pay it off eventually.

There’s no time limit that’s set in stone, but it’s a good idea to wait until you have positive equity.

Being “upside down” on a car loan is the same thing as having negative equity. If, for example, you owe $30,000 on a car that’s worth $25,000, you have negative equity.

If you still owe money on the car, you can trade it in for a cheaper one. If, for example, you owe $15,000 and the car is worth $20,000, the dealer can purchase the car as a trade-in, pay off the loan, and put the $5,000 toward your new auto loan as equity. If you don’t owe money on the car and own it outright, there’s nothing stopping you from trading it in for a cheaper car; you can do what you’d like with it.

Yes, you can trade in a leased vehicle, but the process is a bit different. The dealership will pay off the remaining lease balance, and if the car’s value exceeds this amount, you may receive a credit. If the balance is higher than the car’s value, you may need to pay the difference. Some brands require you to go to one of their dealership’s to receive a payoff amount as well.

To maximize your car’s trade-in value, ensure it is clean, well-maintained, and has no outstanding recalls. Fix minor issues, provide maintenance records, and consider getting minor dents and scratches repaired. This will maximize your trade-in value!