Yes, you can trade in the car, but realize that trade-in value is noticeably lower than what the car is actually worth. So, let's say the car is in great condition, low miles etc and the worth of the car is about 28-30 k in 5 years, you'll probably get a trade in value of 22-25 or so. To the extent you get a trade in Value over the balloon you can apply it to a new car, but I'm sure they'll find some way to dock your trade in value so that doesnt happen.
I may be off on some of this but I asked some of these questions when I bought my car
hope this helps