Before you buy a new car, you probably have to answer another question first: What should you do with your old one?
You could try to sell it yourself, but you’ll need to be prepared to do the work of a car dealer. That means creating advertisements, meeting with potential buyers and negotiating the price. If that process sounds overwhelming, consider trading in your car.
How does trading in a car work? Follow these steps to make dealing it a smooth process.
5 steps to trade in your car
1. Find out how much your car is worth
Trading in a car is about negotiating to get a fair price. But what is fair?
Rather than wait to find out what the dealer thinks, do some research at home to get a sense of your current car’s value. There are plenty of online appraisal tools, such as Kelley Blue Book’s, to help you determine the worth of your car. Rather than rely on basic details – make, model, year and mileage – use a tool that can offer a deeper sense of the dollars your car will command based on additional features.
For example, consider TrueCar’s assessment of a 2016 Toyota Camry V6 XSE. Black is a high-demand color, which adds $150 to the vehicle’s value, and a moonroof would increase the value by another $500. It’s not all about your car, either. Kelley Blue Book points out that the value may also be impacted by external factors. If gas prices are high, a car that gets great gas mileage might be more in-demand than an oversized truck.
2. Take a look at your bank account
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’re trading in a car with a loan, determine whether the trade-in value will be enough to pay off the rest of the vehicle. While the dealer might offer to pay off your loan, you’ll wind up adding that amount to a new loan on your next vehicle.
3. Start asking for offers
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 your negotiation where your car started its journey.
“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 at the Illinois Automobile Dealers Association.
4. Clean up your car
If you had a job interview, you would dress for success. Consider the trade-in appointment to be your car’s interview, and the dealership representative is the hiring manager. Even though you submitted an impressive resume, you still have to close the deal with an equally impressive in-person performance.
“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, vice president of corporate development and strategy 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.”
5. Make an appointment
Car dealerships can be busy places, so Davlin recommends making an appointment to save time. The dealer will evaluate your car to verify that 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 with a loan, have the lender’s details ready to hand over.
“Also, bring your service records if you have maintained the vehicle on a regular basis,” McCloskey says. “A well-maintained vehicle will command a better price.”
Pros and cons of trading in your car
Trading in a car can save you from dealing with the stress and hassle of selling your car on your own, and it can help you avoid paying a large tax bill.
“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.”
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 will miss out on that extra chunk of money.