Trading In Your Car at a Dealer: What to Update the Same Day

Before you go to the dealer

1. Get the new car quoted once you have narrowed the choice, ideally with the vehicle identification number.
2. Know the lender's requirements if you are financing: comprehensive and collision, maximum deductible, and how it wants to be named.
3. Get your old loan payoff figure if you still owe on the trade-in.
4. Clear the old car: toll transponder, garage remote, registration card and personal papers.

Trade-in day, in order

1. Bind coverage on the new car effective at the time of purchase. Do not rely on an assumption that new cars are covered automatically; any grace period, and its terms, varies by insurance company.
2. Give the dealer or lender proof of insurance on the new car.
3. Hand over the old car with keys and title or payoff information, and write down the date, time and odometer reading.
4. Remove the old car from the policy effective that day. Do not cancel the policy itself; the new car is on it.
5. File the Notice of Transfer and Release of Liability within 5 calendar days. Vehicle Code section 5900 and the DMV place that duty on the person who sold or transferred the car, and the filing is what separates you from what happens to it next.

Within 30 days

• Watch the plates. A dealer-sold car can be driven on its temporary plates until the permanent plates and registration arrive, or 90 days from the date of sale, whichever comes first, under Vehicle Code section 4456.
• Look at what was rolled into the loan. If you owed more on the trade-in than it was worth and the difference went into the new loan, you may owe more than the new car is worth for a while. That is the situation gap coverage exists for; whether it fits depends on the numbers.
• Check the refund of any unearned premium on the old car, which depends on the policy.
• Update the commute and garaging if the new car changes who drives it or how far.

Trading in a car you still owe on

When the trade-in still has a loan, the dealer commonly pays off the old lender as part of the deal, but the payoff is not instant. Until it posts, the old loan is still yours and the old lender's lien is still on the title. Keep your payment records, ask the dealer when the payoff will be sent, and check with the old lender a few weeks later that the account shows paid. If a payment comes due in the meantime, ask the dealer in writing whether to make it; a missed payment on a loan you thought was gone can still land on your credit.

A leased car traded in mid-lease follows the leasing company's process instead; the lessor is the owner, so its payoff and release are what end your obligation.

At your first renewal with the new car

• Re-check deductibles against the lender's maximum and what you could actually pay.
• Confirm the driver assigned to the new car is the one who drives it most.
• Consider whether coverages that made sense on the old car, like rental reimbursement, still match the new one.

Shopping for the next car now? You can get it quoted here before you sit down to sign.