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Trading in your car eliminates much of the work of selling a vehicle. The main perk of trading in a car, however, is that it allows you to apply the trade-in value of your old vehicle directly to a new purchase. This can be especially beneficial if you’re financing your next vehicle.
These steps can help you make the most of a vehicle trade-in.
5 steps to trade in your car
Doing your research and understanding how to navigate the trade-in process can help you maximize the amount your trade-in earns.
1. Find out how much your car is worth
The first step to trading in your vehicle is to understand exactly how much it is worth. Figuring this number out yourself will help you to feel empowered when it comes time to negotiate and can also increase your chances of getting a fair price.
Rather than waiting to find out what the dealer thinks, do some research to get a sense of your current car’s value. Free online appraisal tools, such as Kelley Blue Book or Edmunds, can help you determine the worth of your car. If available, use estimator tools that can offer a deeper sense of the dollars your car will command based on car features beyond make, model, year and mileage.
Value may also be impacted by external factors. If gas prices are high, as they are now, a car that gets better gas mileage might be more in demand than an oversize truck.
2. Take a look at your finances
Trading in a car involves more than assessing the vehicle. You’ll also need to evaluate the state of your finances to know what you can afford on the other side of the trade.
If you are trading in a car with a loan, determine whether its trade-in value will be enough to pay off the rest of the loan. You can do this by contacting your lender to find out the loan’s payoff amount and comparing that figure to your car’s trade-in value. Visit multiple dealers to request trade-in quotes and get a firm idea of how much dealers will be willing to offer.
Remember, if a dealer offers to pay your loan off for you, you will likely add the payoff amount to a new loan for your next vehicle.
3. Ask for offers from multiple dealers
You don’t have to go to the dealer to start the trade-in process. Instead, you can make dealers come to you with a price. Many online value estimators, such as Kelley Blue Book and TrueCar, are linked to dealers that will extend offers based on the information you share about your car.
It also may be smart to start where you bought your vehicle.
“If the consumer is able to go to the same dealership where he or she purchased the car, he or she may be able to negotiate a better deal since they have a relationship and history with that dealership,” says Meghan Davlin, director of communications and member engagement at the Illinois Fuel and Retail Association.
4. Freshen up your car
A cleaner vehicle is more likely to sell. Take the extra time to clean the interior and exterior of your car so that you are showing it in its best condition to help increase its trade-in value.
“Make sure your car is clean and you’re presenting it as you would want to receive it if you were buying it,” says Alain Nana-Sinkam, senior vice president of business development at TrueCar. “Also, if there were small flaws you had planned to fix prior to the trade, make sure to get them done so the car is delivered to the dealer as you had reported and as they are expecting it.”
A nicely maintained vehicle will receive a much better price. Just don’t pay more to fix the vehicle than you expect to sell it for.
Be sure to have any service records on hand.
This is also a good time to check for any recall alerts for your vehicle. If there are any defective components that triggered a recall, it could lead to a safety risk. Most recalls result in the repair or replacement of a vehicle part at no cost to the consumer.
5. Make an appointment with a dealer
Car dealerships can be busy places. Make an appointment in advance to save yourself time. The dealer will evaluate your car to verify all the information you submitted online is correct.
“Ask if you can be present with the appraiser so that you can ask them questions on how they are determining the value of your vehicle,” says Joe McCloskey, president of McCloskey Motors in Colorado Springs, Colorado. “Most dealerships will share this information with you, and having this information will help you to better understand how and why the dealer is valuing your vehicle’s value.”
Be sure to bring the vehicle registration, the title and all sets of keys. If you don’t have the title because you’re trading in a car that still has a loan, have the lender’s details ready to hand over.
And remember, you don’t have to accept the initial trade-in amount a dealer suggests. You can negotiate your car’s trade-in value. Dealers typically begin by offering the lowest price possible. Tell the dealer the price seems too low based on offers from other dealers or the value you’ve found in your research.
Negotiating the trade-in price separately from the purchase price of your next car also helps ensure that you are getting the best trade-in value possible.
When to trade in your car
The key to knowing if it is a good idea to trade in your car is your vehicle’s equity. Your car’s equity is the difference between the amount that you still owe on the vehicle and the current value that it holds.
It’s best to avoid trading in your vehicle when you are upside-down on your loan, which is the same as having negative equity. This means you owe more on the vehicle loan than the car is currently worth. This is a challenging situation to be in because you will still have to pay the remaining loan balance after trading in your car.
If possible, wait and continue making payments until you are no longer underwater. If you need to trade in your car with negative equity, consider buying a less-expensive vehicle to help minimize your losses.
Having positive equity, on the other hand, is a good spot to be in because it allows you to take the additional value from your vehicle and use it towards the purchase cost of the new vehicle.
Pros and cons of trading a vehicle in
Before you trade your vehicle in, make sure you understand the benefits and drawbacks of selling the vehicle yourself.
Pros of trading in a car
The most significant advantage to trading your car in is that it can save you from the stress and hassle of selling it on your own. Selling a car requires identifying the right price, posting the car for sale where people will see it and dealing with prospective buyers. But when you trade it in, the dealer does a lot of the heavy lifting for you.
“In most states, there’s also a tax advantage to buying and trading in at a dealership,” Nana-Sinkam says, “because in those states, they only charge tax on the difference between the trade-in value and the new vehicle price instead of paying full tax on the full purchase price of a new vehicle.”
Finally, trading your car in can simplify the steps between selling your old car and buying a new one. Rather than going to multiple places, you can take your old car to the dealership and use the trade-in value as equity toward your new car.
Cons of trading in a car
There is one major downside to trading in your car, though: You probably won’t make as much money as you would if you sold the vehicle yourself. The car dealership wants to make a profit by reselling your used car to another driver, so you’ll miss that extra chunk of money.
Trading your car in might also limit your options when it comes to buying your next car. If you’re planning to use the value of your old vehicle as the down payment on a new one, you may want to purchase your next car from a dealer willing to buy the old one.
Trading in your old car rather than selling it yourself can streamline the process of getting into a new vehicle. To maximize the money you make, start by researching the value of your car with free online car estimators.
Before heading to a dealer, have your car cleaned inside and out and make cost-effective minor repairs. It’s also a good idea to obtain offers from multiple dealers and remember that you can negotiate the trade-in price.