How to Trade In a Car

When you decide to trade in your car instead of selling it yourself, there are a few things to think about. One big downside of a trade-in is that the dealer might not pay you as much as your car is worth because they plan to sell it for more money. But, trading in your current car can be easier and save you time because you don't have to advertise it or meet with people who want to buy it. Take a closer look at the following steps involved in a car trade-in. 

1. Research value of your vehicle

When it comes to researching the value of your trade-in, be sure to check multiple pricing sites beyond just Kelley Blue Book and Edmunds. Expand your search for valuation estimates to include the NADA Used Car Guide, Carvana, Vroom and get quotes specific to your exact vehicle trim, odometer, and condition when possible. This will give you a realistic range to set expectations. And weigh whether selling it as a private party could potentially yield more money than the wholesale-level pricing dealers may offer on a trade-in.

2. Gather all your documents

When you visit the dealership, bring all relevant documents, including your current vehicle registration, driver’s license, service records, and any keys for the car you are trading in. If you have an auto loan on the vehicle, you will also need to have information about the loan payoff amount.

3. Clean your car

This includes vacuuming the carpet and clearing out any trash, a clean car can get you a better appraisal. It's important to ensure that you have removed all personal belongings and cleared any personal data from the car's electronic system before trading it in or selling it. 

4. Request trade-in quotes

Contact multiple dealerships to request trade-in quotes. Provide them with a description of your vehicle’s condition to get an initial estimate of its trade-in value. Most dealers will only provide a firm trade-in quote after physically inspecting the car.

5. Negotiate the car’s trade-in value and new car price

Once you have selected a new car, negotiate the trade-in value and the price of the new car separately. Remember that the trade-in price is essentially a credit that is deducted from the negotiated price of the new car.

6. Close the deal 

If you own your car outright, the trade-in value will be deducted from the price of the new car. You can then pay the remaining amount with cash or an auto loan. If you still owe money on your car, the dealership can help facilitate the trade-in and payoff of your existing loan.

7. Transfer license plates and cancel your auto insurance

In some states, you can transfer the plates from the trade-in to the new car, while in others, you may need to cancel your existing car insurance on the old vehicle. It's important to check the specific requirements in your state and ensure that you follow the necessary steps to transfer the plates or cancel the insurance to avoid any potential issues. 

The best time to trade in a car depends on multiple factors, including the age of your car, mileage, and even the time of year. Take a closer look at the following considerations that will help you to determine the best time to trade in your car:

• End of the calendar year: The end of the calendar year is often considered one of the best times to trade in a car, especially if you intend to trade in to purchase a new car. This is because manufacturers close out the year and offer incentives to clear out old inventory.
• Equity and loan status: If your car's book value exceeds its loan payoff amount, it may be a good time to trade it in. This is an indicator that you have good equity in the car, which can be used to reduce the cost of the new vehicle you're buying.
• Mileage and condition: The more miles your vehicle has, the more its value will depreciate. Some experts recommend trading in a vehicle you bought new before its factory warranty expires, which can help maximize its trade-in value.
• Seasonal demand: Consider the seasonal demand for certain types of vehicles. For example, all-wheel drive vehicles are likely to be in high demand in the fall before the snow starts, while convertibles significantly rise in value as the sun becomes stronger.
• Market conditions: Market conditions can affect used car values. For example, during economic downturns, demand for used cars often increases, which can boost their value. Conversely, if new car sales are booming, trade-in values may decrease due to lower demand for used vehicles.

Trading in your vehicle at a car dealership is convenient, straightforward, and can provide an instant down payment for your new car. However, just like any financial decision, it has its pros and cons:

Pros of trading in your car

1. Convenient: Trading in your car is the most straightforward way to dispose of your old vehicle when buying a new one. Car dealers handle all the paperwork and logistics, making it a hassle-free trade-in process.

2. Instant equity: When you trade in your car, the value is immediately applied towards your new car purchase price, reducing the amount you need to finance.

3. Lower sales tax: In many states, you only pay sales tax on the difference between the trade-in value and the price of the new car, saving you some money.

4. One transaction: Trading in allows you to sell your old car and buy a new one in a single transaction, saving you time and effort.

Cons of trading in your car

1. Lower sale price: Dealerships need to make a profit, meaning they often offer less than what you could get if you sold your car privately.

2. Limited negotiating power: When you trade in and purchase in one transaction, it can be more challenging to negotiate the best deal for both.

3. Potential negative equity: If you owe more on your car than it's worth, the remaining balance (negative equity) could be rolled into your new loan amount, increasing your debt.

4. Sales pressure: Dealerships might pressure you to accept their trade-in offer and close the deal on a new car on the same day, which may not give you enough time to consider all your options.

The decision between privately selling and trading in your car is highly dependent on your individual preferences and circumstances. If you're after the highest possible return and have the time and energy to handle the sales process, private selling could be a good fit. Conversely, if you value convenience, time efficiency, and a streamlined process, trading in your vehicle at a dealership might be the way to go. Always consider all factors before making your decision.

If you're thinking about trading in car, you should ask yourself a couple of questions beforehand. Take a look at the following to determine if trading in your car is the right move for you:

• How much is my car worth? The value of your car plays a significant role in this decision. You can use online tools like Kelley Blue Book or Edmunds to estimate your car's value. Remember, the value of the car will likely be less than what you could get during a private sale.
• In what condition is my car? If your car is in high demand and in good condition, you might get a decent trade-in offer. However, if it needs major repairs, the cost might outweigh the trade-in value.
• Do I still owe money on my car? If you owe more on your car than it's worth (known as being "upside down" on your loan), trading it in might not be the best idea. You'll still need to pay off the balance of your personal loan, which could be added to your new loan term and increase your monthly payments.
• Can I afford a new car payment? If you're considering trading in your car for a newer model, understand that this often means taking on a new car loan. Make sure the potential new payment fits comfortably within your budget.
• What are the benefits of a new car? Are there specific features or improvements in your next vehicle that make it worth it? These could include better fuel efficiency, more safety features, or advanced technology.