The U.S. Consumer Financial Protection Bureau generally recommends paying off the balance on your loan before trading in a vehicle, so that your loan balance isn’t rolled into a new loan.2 When you roll over an existing balance, you increase your total loan costs and the amount of interest you’ll pay over the life of your loan. If you owe more on the car than its trade-in value, it’s advisable to wait until you pay off the loan (or pay it off all at once if you can) before trading it in.