does a trade in count towards a down payment of a new car in canada?

Does a Trade-In Count as a Down Payment in Canada? (2024)

Posted by on Feb 13, 2024 - Archived under Uncategorized

The car trade in process used to be much more painful than it needed to be. Now the used car market is so buoyant, dealerships are much more willing to buy good quality used cars as they know there is a vibrant market waiting for it. So, can you use a trade-in as a down payment on your next auto loan?


There are a few things you can do to help the trade-in or to get a little more value for it. All so you can put more of a down payment on your next car loan.


Here’s how you go about trading in.

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Trading in Your Old Car


A trade in involves selling your existing car to the dealership and putting that amount towards the cost of a new car. Depending on how much it’s worth, you can use a trade in as a down payment or as full deposit alongside a car loan.


Either way, it reduces the amount of finance you have against the car. This lowers the cost to you and can be viewed favourably by lenders as you are putting your money where your mouth is.


Get a Settlement Figure for Your Current Loan

If you have outstanding finances, the first thing you need to do is find out how much is owed. This will have to be settled when you trade in. You can do that at the same time as getting the new car loan if you like and we can help with that.


Keep the settlement figure in mind when looking at your budget as it will have to be factored in somewhere.


Get a Valuation of Your Trade In

The value doesn’t have to be exact yet but it helps to have an idea of how much your current vehicle is worth. You can take it to a Halton Hills dealership for an appraisal or you can get a rough idea of value from Canadian Black Book.


Remember that values are approximate so only use them as a guide and not to set expectations.


Prepare the Car for Trading In

The closer to saleable condition your trade in is, the higher the amount you’ll get for it. That’s because the dealership will be able to turn it around and put it on the forecourt quickly and without spending too much money on it.


That means cleaning it, changing any small parts, making any repairs and generally making it as presentable as possible.


If you have larger repairs to make, weigh up the cost of the repair versus the money the dealer will take off for it. Go with the cheapest option.


Prepare Your Paperwork

When you trade in a car as down payment for an auto loan, you have three sets of paperwork to manage.


The paperwork for any existing auto loan: This will need to be paid off at the time of trading in.


The registration documents: for the car to sign it over to the dealership.


The paperwork to support your auto loan application: That will mean bank statements, wage or salary paperwork, proof of identity and residence and any supporting paperwork.


Check the Trade In Contract

While most Canadian dealerships are reliable, you don’t trust your financial wellbeing on a promise. If your trade in has outstanding finance, don’t just take the sales person’s word that they will pay off the loan.


Make sure it’s in the contract.


We have heard of people trading in with the belief their finance would be settled only to be contacted a month later over a missed loan payment.



Don’t trust, check.


The Benefits of Trading in Your Old Car

There are significant benefits of using a trade in as a down payment on your next car.


For one, you don’t have to haggle with strangers or let them drive you places in your own car while they test it.


You don’t have to risk being carjacked or having the car stolen. You don’t have to contend with test pilots or people who refuse to pay a fair price.


Instead, you get a fair price in a comfortable dealership with respectful sales people. We think those advantages outweigh any small price penalty!



Trading in is now a quick and painless process. If you prepare beforehand, you should enjoy a seamless process and get maximum value for your car.


For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!

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