Can I trade in a car I just purchased?
Buyer’s remorse is a powerful emotion, and it could even prompt you to get rid of the car you just purchased. Or maybe you just don’t like driving it as much as you thought you would, or maybe a different car caught your eye after you signed on the dotted line. Trading in a newly-bought car to get something else instead is one option, but you’ll pay for the privilege.
While you can indeed trade in your car if you just bought it, you need to be aware that doing so will likely carry a large financial penalty. This is easily explained by the fact that, when you sign the agreement with the Financial Service Provider (FSP), it will likely be for an amount that far exceeds the car’s market value.
Your finance agreement will amount to the car’s actual purchase price, plus the interest charged over the loan period (which gets calculated when applying for finance), plus various service charges (originating both at the dealership and the FSP) – and then there are breakdown insurance and even tracking devices (required by some FSPs) to add to your monthly subscription fees on top of all that.
Many of these come with a termination fee, and amount to penalties for cancelling their contracts – much like you’d face if you were to get out of a cell phone contract, in fact. Essentially, you’re in debt (and caught up in recurring payments) for a greater amount than the current value of the asset you have as a bargaining chip (your car).
The add-ons can usually be transferred to another car (albeit at extra cost), however, so the main obstacle would be the settlement value – an amount determined by the bank, which will generally be lower than the total finance contract cost. You can get this settlement value from the FSP with a phone call, and then decide how you’re going to proceed.
What should you do?
The simplest solution would be to hold onto the car until you’re able to sell it for the same amount as your settlement with the FSP would be. If you put down a decent-sized deposit on the car you don’t want anymore when you bought it, there is a chance that it could be worth as much as (or more than) the settlement amount. If this is the case, you can go ahead and trade it in without taking on much of an initial financial outlay.
But even then, you likely won’t be able to put down the same kind of deposit on the car you really want as you did with the one you didn’t. This would then lead to higher instalments on your new car, a balloon payment finance plan (which isn’t really financially sound either), or force you to “buy down” and get something cheaper.
There might be a way out
This is the worst-case scenario, though. You will get better advice about alternative courses of action from your FSP, as their policies can differ somewhat, so rather contact your finance provider directly - they all have help desks, websites and call centres.
Alternatively, you could get in touch with the dealership from which you’d want to buy your next car, and broker a deal through their finance agent to minimise the damage to your finances.
Verdict
Whichever way you look at it, it’s not financially prudent to trade in the car you just purchased. It can be done, but you probably shouldn’t.
* Any information herein is not intended nor does it constitute financial, insurance, tax, legal, investment or other advice. Before making any decision or taking any action regarding these, please consult a suitably qualified professional.
