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The car market has been difficult to navigate over the past few years amid inventory shortages and skyrocketing prices. But in September, for the first time in five months, the average price of new vehicles dropped slightly. Used car prices stabilized, too, according to Kelley Blue Book.
If the market changes have encouraged you to trade in your car for a new set of wheels, don’t speed to the dealer and miss a good deal. First, take steps to boost your car’s trade-in value. These include researching your car’s current value, fixing mechanical issues and making sure your car looks its best.
1. Do your homework
Knowing the value of your car is important, particularly if you plan to trade it in. Conduct research to find your vehicle’s current trade-in value. You can use sources like Kelley Blue Book and Edmunds to get its current sale value, though you should also be honest with yourself about repairs and your vehicle’s condition.
Also, keep in mind that you’ll get less for your trade-in than you would if you sold your car on your own.
“Many people think they are going to get the top value, but dealers taking in the trade need a margin of profit and will offer you less than the trade-in price listed on these sites,” says auto expert Lauren Fix.
2. Take care of known mechanical problems
The mechanical and physical condition of your car are big drivers of value. So, it’s best to resolve any issues that are relatively simple to fix.
In general, minor repairs that don’t cost much out of pocket and are likely to increase the resale value of your vehicle are worth considering. This might include small cosmetic fixes such as dents and scratches or replacing lights that are out.
Research repairs that increase the resale value of your car and the expense associated with each repair to decide which repairs will be the most cost-effective.
You should also check the National Highway Traffic Safety Administration database for any vehicle recalls affecting your car. Recalled parts can be fixed free of charge, and the extra effort may up your car’s value.
Keep receipts for repairs and maintenance, and check your files for old ones. These can prove to the dealer or buyer that you took care of the vehicle. Consider pulling a car history report for your vehicle for the dealer to review when evaluating your trade-in.
3. Make sure that your car looks its best
Fix points out that a clean and well-maintained car is most likely to get the highest trade-in value.
“Clean the vehicle inside and out,” she says. “Detailing the car is like staging a home for resale.”
In other words, curb appeal matters.
4. Shop around for trade-in value
Zach Shefska, co-founder and CEO of Your Auto Advocate, says it’s important to “shop around” your car for trade-in potential.
“Get as many competitive quotes for your trade-in as possible before engaging with the dealer,” he says.
For example, you should get quotes from Carvana, CarMax and any other major used car dealers in your area before discussing your trade-in with the dealer you plan to buy from. You can use these figures, along with other research you do on pricing, to estimate your car’s baseline value.
5. Negotiate trade-in value separately
By negotiating your trade-in and purchase separately, you can ensure you get the best trade-in value possible and the best price on the new vehicle you’re buying.
Shefska recommends that buyers watch out for dealerships that try to combine the two transactions into one deal. They do this because there are more opportunities for a dealer to generate profits when working on two transactions at once.
It’s also a good idea to get the trade-in offer in writing. This protects you from the dealer changing or going back on its offer for any reason. A formal offer is especially important if you leave the dealership to shop around further and return to the same dealer later.
6. Time your trade-in
Trading in your car to buy another vehicle may work better some times of the year than others, depending on the year, make and model of your vehicle. Weather conditions and other factors could also play a role in the offer you receive.
Financial advisor Matthew Kircher of Fairpoint Wealth Management says he recently timed his trade-in value based on demand.
He purchased a new 2021 Toyota 4Runner and traded in his old Ford Escape in January 2021. He was strategic about timing because he knew that all-wheel-drive SUVs would be in high demand during winter and right before the spring college semester.
“We waited until the perfect time to trade in our used vehicle to boost its value,” Kircher says. “We also timed it perfectly, with the best offers for new vehicles coinciding at the same time.”
The first two quarters of the year can also be a good time to trade in a vehicle because buyer demand tends to be higher. Dealers need more vehicles available on their lots to meet the demand and may offer a higher price for your trade-in.
Trading in a car when you owe money on it
Trading in may not be the right choice if you’re still paying off your car, particularly if you owe more than your car is worth. You may want to postpone your next car purchase or sell the car on your own to earn a higher price. But if you trade it in, the negative equity doesn’t just disappear and is likely to roll into the subsequent car loan.
The Federal Trade Commission (FTC) cautions against using a dealership that promises to “pay off your loan no matter how much you owe.” While a dealership might pay off your old loan, it must make up the difference somewhere — and that “somewhere” will eventually catch up with you.
“Dealers may include the negative equity in consumers’ new car loan,” writes the FTC. “That would increase their monthly payments by adding principal and interest.”
The bottom line
Ensuring you get the best trade-in value can help you get a lower price and monthly payment on the new or used vehicle you want. It’s well worth it to do your research, make much-needed repairs, spruce up your ride and secure multiple quotes.
When it’s time to buy, use the same research skills to compare auto loans. A dealership you’re working with might offer in-house financing, but that doesn’t mean it’s the best deal. You may be able to get preapproved for an auto loan online with better terms and use the loan offer as leverage when negotiating a deal on your next car purchase.