8 tips for negotiating a car trade-in

5. Negotiate the new purchase and car trade-in separately. Conventional wisdom dictates that each transaction should be treated separately. However, rather than negotiating the new car price first, Reed suggests you start the deal with the car trade-in, especially if you have a fairly sought-after car. One way to find out is to put up an ad on and see what kind of responses you get. Leave off your phone number if you like and just use the e-mail address, but see how many people bite.

"The trade-in is the weakest part of the deal. But if you have something desirable, the only reason the dealer won't take it is if he already has two or three of the same vehicle on his lot," says Reed.

6. What should you say? Start your negotiation by letting the salesperson know you've done some research, says Scott. "Say something like, 'I was researching cars online to see what I can get for this car,' not 'it's worth $4,000 and not a penny less,'" Scott says.

7. Avoid game playing. Reed says some unscrupulous car dealers have been known to throw your keys on the roof so you can't leave until you drive off in a new car.

"Avoid all this game playing, and don't surrender your keys," says Reed. "Make a phone call before you go, ask the used-car manager what the value of your trade-in is. If you get a negative feeling on the phone, you'll want to scratch them off your list and save yourself a trip."

Salespeople may also try to hold on to your driver's license and registration, says Emerson. "Carry a copy of your driver's license to give them and don't part with the registration until you're in the finance office."

8. Explore the tax advantage. All but eight states allow you to pay sales tax on the purchase price of the new vehicle minus what the dealer is giving you for your car trade-in. The reduction in sales tax in states with rates of 9 percent to 11 percent can be substantial. Check your state's tax advantage. Emerson says you can save as much as $1,000.

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