Key takeaways
- Trading in your car can make selling your vehicle and buying a new one go much quicker.
- The trade-in value of your car is negotiable. Know what your vehicle is worth, but understand that trade-ins are likely to net less money than a private sale.
- Shop around to find a dealer that offers a good deal on your trade-in and a fair price on your new vehicle.
When buying a new car, it can be helpful to have a vehicle you already own that you can trade in. A trade-in gives you a head start on your down payment — and you don’t have to trade in your old car at the same dealership you plan to buy from.
Trading in your car also eliminates much of the work of selling a vehicle, allowing you to cruise home in your new ride much quicker than you would if you had to sell your car yourself. Just be prepared to research how much your car is worth and negotiate once you visit the dealership.
How to trade in a car
Doing your research can help you better understand how to trade in your car so you can maximize the amount your trade-in earns.
1. Find out how much your car is worth
Before you can trade in your vehicle, learn how to calculate your car’s value. Knowing this figure in advance may help you 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.
External factors may also impact the value of your vehicle. 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 how much car you can afford on the other side of the trade. You may also want to compare top lenders to get a firm idea of the loans you qualify for — and how your trade-in could potentially increase your buying power.
If you are trading in a car with a loan, determine if its trade-in value will be enough to pay off the remaining balance. Contact your lender to confirm the payoff amount and compare that figure to your car’s trade-in value by visiting multiple dealers to request trade-in quotes.
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. This is called rolling over your auto loan and can lead to difficult financial situations in the future.
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. You can then use these online quotes to negotiate with dealerships and secure the best possible deal.
When you’re ready to negotiate, remember that you don’t have to sell your trade-in and buy your new car at the same dealership. Negotiate the trade-in price separately from the purchase price of your next car. You could trade your car in at one dealership and then purchase a car from another to maximize your savings.
Remember, you don’t have to accept the initial trade-in amount a dealer suggests. Dealers typically begin by offering the lowest price possible, so you can negotiate your car’s trade-in value. Tell the dealer the price seems too low based on offers from other dealers or the value you’ve found in your research.
4. Prepare your car for trade in
Provided you have been keeping up with regular car maintenance costs, you should receive a better price on your trade-in. Take the extra time to clean the interior and exterior of your car to help boost your car’s 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, Chief Industry Analyst 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.”
What do you need to trade in a car?
Be sure to have any service records and the vehicle registration, car title and all keys on hand. If you don’t have the title because you’re trading in a car with a loan, have the lender’s details ready as well.
5. Make an appointment with a dealer
Car dealerships can be busy places, so make an appointment in advance to save yourself 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 about how they are determining the value of your vehicle,” says Joe McCloskey, owner 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.”
With your research and documentation on hand, be prepared to negotiate — and walk away if the dealership isn’t able to offer you a good deal. There’s nothing wrong with shopping for quotes at multiple dealerships to get the best value for your trade-in.
Pros and cons of trading in a vehicle
After you determine how to trade in your car and the value it has, make sure you understand the benefits and drawbacks of selling the vehicle before you visit any dealerships.
Pros of trading in a car
- The trade-in process may save you the stress and hassle of posting your car online and going through the process of a private sale.
- There may be a tax credit for your trade-in, depending on your location. In some states, you will only be charged tax on the difference between your old car’s trade-in value and the price of your new vehicle.
- It simplifies the shopping process. You can buy and sell in one place, using your old vehicle’s trade-in value as equity toward your new car.
Cons of trading in a car
- Your profit will likely be smaller than it may have been by selling the vehicle yourself.
- If you want to find a dealer that can source your new car and is also willing to buy your old one, your options may be more limited.
- You could lose money if you are upside-down on your loan. If you need to trade in your car with negative equity, consider purchasing a less expensive vehicle to help minimize your losses.
Bottom line
Knowing how to trade in a car rather than selling it yourself can streamline the process of getting into a new vehicle. To maximize your trade-in’s value, start by researching the value of your car with free online car estimators.
Before heading to a dealer, deep clean your car 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.
In addition to shopping for the best value for your trade-in, make sure you compare auto loan rates so you know exactly how much your next car will cost you.
Frequently asked questions
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Most lenders allow you to roll the outstanding balance into your new auto loan, or you can pay out-of-pocket before trading the vehicle. If you have positive equity, the trade-in value should cover the outstanding balance, and the difference will be applied to the new loan.
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If you’re upside-down on your auto loan or prefer to explore other options, consider a private sale or an online dealership. Both allow you to skip the trade-in process and instead walk away with cash for your next vehicle — provided you don’t owe money on a loan.
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Trading in a car can be worth it if you want a seamless car-buying experience. The dealership can assess your vehicle’s value on the spot and present you with an offer, saving you time and money you’d otherwise spend preparing your car for a private sale and attracting the right buyer.
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It depends. If your vehicle has a sufficient amount of equity, trading it in could help streamline your next purchase and decrease the amount you have to borrow. That said, if you’re upside-down on your auto loan, consider a private sale first, as you’ll likely earn more to minimize the impact of the negative equity.
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No, trading in your vehicle does not impact your credit score. However, applying for a new auto loan results in a hard inquiry, which can ding your credit score by a few points.
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