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Auto Note Trading: Everything You Need to Know

Trading in a car before the loan is paid off can be an attractive option for many car owners. It allows them to upgrade to a newer model or reduce their monthly payments. However, there are important considerations to keep in mind before diving into auto note trading. In this comprehensive guide, we will explore the ins and outs of trading in a car with an outstanding loan and provide you with essential information to make an informed decision.

Key takeaways:
Auto note trading refers to the buying and selling of auto loan debts, often carried out between lending institutions and investors or between different financial institutions. The entity buying the auto notes gains the right to collect the debt repayments, converting these notes into an investment opportunity.

Can I Trade in a Car I'm Still Paying Off?

It depends on where to sell auto notes, but the short answer is yes, you can trade in a car you're still making payments on. However, it's important to understand that your car loan doesn't magically disappear when you trade in your vehicle. Instead, the trade-in value of your car is applied as a credit toward your next loan. Depending on the remaining balance on your loan, this credit may cover the amount you owe entirely. If it falls short, the remaining balance will be rolled over into your new car loan.

Consolidating your debt into a single, new loan can help you manage your payments more effectively. However, it's crucial to note that the new loan will likely have a higher balance. This means you'll need to carefully consider whether trading in your car is the right decision for your financial situation.

Understanding the Risks of Trading in a Car with a Loan

Before proceeding with auto note trading, it's important to be aware of the potential risks involved. These risks not only affect you, but also the auto note buyers. By understanding these risks, you can make an informed decision that aligns with your financial goals.

First and foremost, taking out a new car loan can make it more challenging to afford your monthly payments. The balance of your new loan will include the amount you owed on your previous loan, as well as the remaining balance on your current vehicle. This can result in a higher monthly payment and potentially higher interest rates over the life of the loan. This could also affect the interest of auto note buyers in your loan.

Another risk to consider is the possibility of negative equity. Negative equity occurs when you owe more on your car loan than the vehicle is worth. This can make it difficult to trade in or sell your car until you have positive equity, and it is a scenario that auto note buyers will consider before purchasing your auto note. Understanding these risks and how they impact all parties involved in auto note trading will help ensure a smoother transaction and better outcomes.


Steps to Trade in a Car with a Loan

Trading in a car with a loan may seem intimidating, but the process is relatively straightforward. By following these steps, you can navigate the trade-in process with confidence:

1. Find a New Car that Fits Your Budget

Before trading in your current vehicle, it's essential to find a new car that aligns with your budget. Research different makes and models, and use online calculators to estimate monthly payments based on factors such as down payment, credit score, and loan period.

2. Determine Your Car's Trade-In Value

To get an idea of how much you can expect for your trade-in, research your car's trade-in value. Websites like Car and Driver offer trade-in estimators that can provide you with an estimate. However, it's advisable to visit a dealership in person to get an accurate trade-in offer.

3. Gather the Necessary Paperwork

When trading in a financed vehicle, you'll need to provide certain paperwork to the dealership. This includes your loan account number, loan balance, driver's license, vehicle registration, car keys, and, if available, your car's title. It's also essential to bring proof of insurance and a print-out of your trade-in value estimate, if you obtained one.

4. Contact Your Lender

The dealership will typically handle contacting your lender to pay off your original loan in full. If there is still a remaining balance after the trade-in credit is applied, it will be rolled over into your new car loan and added to the balance.

5. Complete the Paperwork

The dealership will handle all the necessary paperwork for the trade-in process. They will transfer the title of your old car into their name and transfer the title for your new car into your name. Before leaving the dealership, you'll need to sign the paperwork for the new loan.

6. Commence Payments on the New Loan

The final step is to begin making payments on your new loan. Typically, you'll have approximately one month between purchasing the vehicle and when the first loan payment is due. Consider setting up autopay or setting a reminder to ensure you don't miss any payments.

Determining the Best Time to Trade In Your Car

Timing can be crucial when it comes to getting the most value for your trade-in. Here are several factors to consider when determining the best time to trade in your car:

1. Age of the Vehicle

The age of your car plays a significant role in its trade-in value. The steepest decline in value occurs within the first two to three years of ownership. After that, the depreciation rate tends to flatten out until around year eight. Beyond that point, selling your car to a private party may yield the best returns.

2. Mileage

While mileage is an important consideration, it's not the sole determining factor for trade-in value. Other factors, such as maintenance records and the overall condition of the vehicle, can influence its valuation. However, crossing certain mileage milestones, such as 100,000 miles, may impact the resale value, as some buyers and dealerships perceive higher mileage as a potential risk.

3. Maintenance and Warranty

Consistent and thorough maintenance can positively impact the trade-in value of your car. Additionally, trading in your vehicle before the manufacturer's warranty expires can lead to a higher trade-in value. Most car makers offer new vehicle warranties for three years or 36,000 miles and powertrain warranties for five years or 60,000 miles. Trading in before the warranty expiration can be financially advantageous.

4. Seasonal Factors

Timing your trade-in to coincide with certain seasonal factors can also affect the value you receive. Dealerships often require more used car inventory in the first half of the year. March, in particular, tends to be an excellent time to get a strong trade-in offer as dealerships strive to meet sales goals. Additionally, trading in before the release of a new model year can increase the trade-in value, as your car will be seen as one year younger.

Selling Your Car Privately: An Alternative Option

While trading in your car can be convenient, it may not always yield the highest value. Selling your vehicle privately can often result in a higher payout. Platforms such as Facebook Marketplace, eBay Motors, and Craigslist make it easy to connect with potential buyers in your area.

Selling your car privately allows you to set your price and negotiate directly with buyers. It also eliminates the need to trade in your vehicle at a potentially lower value. However, selling a car privately requires more effort on your part, including advertising, screening buyers, and handling all the necessary paperwork.


Auto note trading and choosing to buy auto loan portfolios can be viable options for those looking to upgrade their vehicles, reduce their monthly payments, or diversify their investment portfolio. By considering the risks involved, understanding the trade-in process, and timing your trade-in or purchase of auto loan portfolios strategically, you can make a well-informed decision that aligns with your financial goals.

Whether you choose to trade in your car, sell it privately, or invest in auto loan portfolios, remember to research your options thoroughly and negotiate for the best value possible. This approach not only helps you make a smart decision when it comes to auto note trading but can also guide you on when and how to buy auto loan portfolios for optimal returns.


Written by
Carlos Aispuro
Lender Relationship Director

With thirty years of experience in banking, debt collections, compliance, audit, and governance, I have supported strategic plans and improved customer experiences. I possess hands-on knowledge in crucial C-Suite areas, including developing new policies and procedures, optimizing their models, and exploring new tools to help institutions achieve their goals more effectively.

  • Banking, debt collections, compliance, audit, and governance expert
  • Crucial C-Suite areas expert



How to Sell My Auto Notes?

Information about accounts for sale needs to be downloaded from the accounting system. Information about VIN numbers, car type and model needs to be added to the data tape. If you’re planning to sell charged-off accounts we recommend you consider English auction, in case of selling performing accounts Sealed bid auction is the best decision.‍

What Are the Benefits of Selling Your Auto Notes?

Selling Your Auto Notes benefits lenders because it helps get money back into the company to issue new loans.‍

What Is an Auto Loan Portfolio Sale?

An Auto Loan Portfolio Sale transfers the title to a debt buyer for auto loan accounts. Auto Loan Portfolio Sale can be either performing or charged-off accounts sale.‍

Can I sell a car that I still owe money on?

Yes, it is possible to sell a car that you still owe money on. However, you will need to pay off the loan before transferring the title to the new owner.

What should I do if I have negative equity in my car?

If you have negative equity, you may need to pay off the remaining loan balance out of pocket or consider rolling it into a new loan. Proceed with caution and carefully evaluate the long-term financial implications.

How do I communicate with my lender when selling a financed car?

Contact your lender to inform them of your intention to sell and discuss the necessary steps. Each lender may have specific requirements, such as bringing the buyer to a local branch to pay off the loan balance.

Are there alternatives to selling a financed car?

Yes, alternatives include paying off the loan before selling, transferring the loan to the buyer, or refinancing the loan to improve the selling prospects. Explore these options based on your specific circumstances.

What debt are we selling

We specialize in car, real estate, consumer and credit cards loans. We can sell any kind of debt.
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