Can I trade in my car if I am upside down on my loan?

You may be wondering, "Can I trade in my car if I still owe money on the loan?". The proceeds you earn in the trade will go to repay the remainder of your loan sum. However, if you are upside down on the loan, you may run into additional costs. In an upside-down loan, the proceeds for the sale are too small to cover the loan balance. You will not be excused from repaying the total amount if you are in a traditional, recourse loan. In this case, you will need to repay the remainder out of pocket. Alternatively, a lender could extend you additional funds when you purchase your next car, but this will add to your total financing cost.