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How to trade in your car: 5 simple steps to take

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Trading in your car saves much of the work associated with selling a vehicle, like creating advertisements, meeting with potential buyers and negotiating the price. The main perk is it allows you to put the trade-in value of your old car toward your new car purchase. This can be especially beneficial if you’re financing your next vehicle

5 steps to trade in your car

Make trading in your car a smooth process by going step by step.

1. Find out how much your car is worth

The first step to trading in your vehicle is to understand how much it is worth. Figuring this number out yourself will help you to feel empowered when it comes to negotiation and up 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. There are plenty of online appraisal tools, such as Kelley Blue Book, to help you determine the worth of your car. Don’t just 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. 

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 oversize truck.

2. Take a look at your bank account

Trading a car in 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 loan. While the dealer might offer to pay your loan off, you’ll likely wind up adding that amount to a new loan for 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 you initially got 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 at the Illinois Automobile Dealers Association.

4. Clean 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.

“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 lending and insurance solutions 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.”

Along with freshening up the aesthetics of the vehicle, be sure to have any service record on hand. A nicely maintained vehicle will receive a much better price.

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 that still has a loan, have the lender’s details ready to hand over.

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. You might be familiar with — and trying to avoid — becoming upside down on your loan, which is the same as having negative equity. 

It is recommended to not trade in your vehicle if you are upside down on your loan because you will continue to accrue additional payments. Unlike financing a new vehicle outright, trading in removes a large chunk of the payment on your new vehicle. It could end up costing you more if your vehicle’s equity is not in check.

Pros and cons of trading a vehicle in

Before you trade your vehicle in, make sure you understand the benefits and drawbacks versus 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 dealing with 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 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 out on 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’ll have to purchase your next car from a dealer willing to buy the old one.

Next steps

If you’re looking to upgrade your vehicle, consider whether you’d rather sell your old car on your own or trade it in. Trading your car in may save you time, but you could end up getting less money than you would with a private sale. If you’re unsure of which route to go, talk to local dealerships to get an idea of how much they might offer you and decide from there whether a trade-in is worth it.

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Written by
David McMillin
Contributing writer
David McMillin is a contributing writer for Bankrate and covers topics like credit cards, mortgages, banking, taxes and travel. David's goal is to help readers figure out how to save more and stress less.
Edited by
Auto loans editor