Any advice that begins with “stop making payments” is never a good idea. The situations in which doing so will not seriously harm your credit are few, and there is almost always another way to approach whatever issue is causing you to consider failing to continue with your agreed-upon payments.
“Kicking the trade” is no exception.
What is kicking the trade?
The relatively new tactic is becoming more popular with unscrupulous car dealers as they’ve figured out the only thing they need to know: it can help them make a sale.
They don’t care how it affects the car buyers—and negative impacts are serious and long-lasting. Even if your credit isn’t perfect, taking part in this will hurt it even more, and your credit score is likely to drop by at least 100 points.
While the dealer may not explain it to you exactly this way, what kicking the trade really means is that you agree to a voluntary repossession. Once you buy your new car, you’ll be instructed to call the lender who holds the note for your current car and tell them you’re not making any more payments.
What Happens When You Stop Making Payments On Your Old Car?
Another thing that the dealer who is advising you to do this likely won’t mention is that you’ll still owe the balance of the note. The lender will sell the car, but if they don’t recover the full amount you owe, you’ll still be responsible for it.
Since kicking the trade is used when a car is underwater (meaning you owe more than it’s worth), selling it won’t cover your note, and you’ll have to pay the difference.
Check out this example:
You owe $20,000 on your car, but the car is worth $10,000.
This means you’re underwater. You tell the lender to pick up the car and they sell the car at auction for $9,000.
Now you’ll have to pay the balance of $11,000.
You lose. Your existing lender loses. The new dealer wins.
Keeping that in mind, don’t listen to anything the dealer tells you as he tries to list all the reasons this is a good idea. Never get your information from the one who stands to gain.
Why Kicking The Trade Is Just Not Worth It
Is kicking the trade legal?
This practice is technically legal, but it’s also unethical and harmful to all parties except the dealership selling the car.
No matter how much you want that new car, being in the hole for part of your current car’s value and trashing your credit just isn’t worth it. At AutoSmart, we put our customers first. That means we’d never suggest doing something that would be harmful to you in the long run.
Instead, we find legitimate ways to make car buying accessible—even for those with bad credit. From easy approvals and affordable monthly payments to reliable vehicles backed by a free 3-month, 3,000-mile warranty, it’s easy to see why we’re the smart choice when you’re ready to buy.
If you’re in a current loan and it’s not the ideal time to buy, we’ll tell you that, too—and we’ll give you advice to better position yourself to be able to buy in the near future. When you’re ready, we’ll be here to give you a great deal on a quality pre-owned vehicle.
Whether you want a car with impressive horsepower or just a reliable family sedan, you’ll find what you’re looking for at AutoSmart. Stop by today to chat with a member of our team and to learn more about our car buying process.
The AutoSmart Difference
At AutoSmart, our mission is to “Improve the lives of our customers by providing them access to automobile ownership.” Simply stated, we want you to “Own Your Journey”. Part of that journey is taking ownership of improving your credit through purchasing a car. All too often, car dealers will compromise integrity and ethics in the pursuit of making a dollar. “Kicking a trade” (letting your car repo) is a prime example of that. Dealers that conduct business in this manner are not building your credit, they are actually tearing it down. Dealers that encourage you to let your car repo, so they can sell you another one, are not only setting you up for potential legal troubles, but they are also making it more difficult to improve your life by shattering your credit. At AutoSmart, we are guided by a moral and ethical compass in all we do. We do not encourage potential customers to let their car repo because we truly care about improving lives!
-Lucas Ponder, Chief Executive Officer