How To Trade In A Car
If you decide that trading in your car is your best option, it is important to learn how to get the most money out of the transaction.
1. Know Your Cars ValueDealers always want to pay the least amount possible. For this reason, some attempt to low-ball the consumer with a price thats below the net value of the trade-in.
If you dont know what your car is worth, youre likely to accept any offer. Therefore, do your own research before stepping foot on the dealers lot. Go to Kelley Blue Book online and enter the make, model, year, mileage, and condition of your car to learn the trade-in value. Print a copy of this information and bring it to the dealership.
2. Fix Up the CarAny cosmetic damage to your car can lower its net value and cause a low trade-in value. You dont have to give your car an entirely new paint job, but it doesnt hurt to clean up the interior or exterior a bit before speaking with a dealership. Shampoo the carpets, drive the car through a car wash, purchase touch-up paint to conceal minor scratches, and repair dents. Simple repairs can add significant value to your car and increase the trade-in offer.
3. Shop AroundShopping around does more than get you the best interest rate on your auto loan or the lowest price on your new car it also helps you get the most for your trade-in. Visit multiple dealerships and request an estimate to learn the value of your trade-in. Keep copies of your quotes and use this information as a bargaining chip.
Getting The Best Value For Your Current Car When Buying A New Car
Youre about to start the car buying process. Which likely means youre asking yourself that eternal question: What should I do with my used car? Sell it, or trade it in?
There are advantages to both. If you have an exceptionally clean vehicle that has well over the normal number of miles on it, you may do better trying to sell the car yourself, as high mileage works against trade-in value at a dealership. Conversely, if your current car is on the junky side, you might find a buyer who doesnt care as much about that as a new-car dealership does.
But then youd be going through the hassle of putting your used car on the market and dealing with car buyers who may or may not have a genuine interest in buying. Its simpler and easier to trade in your old car, but youll still need to do some prep work to make sure you are getting the highest trade-in value. You might also consider selling your car to CarMax or Carvana, as they will quickly determine the value of your used car and offer a purchase price. The money they provide can help you eliminate any loan balance you may have on your current car, and ideally provide you with a full down payment for your new car.
Are There Any Risks Linked With Trading In My Car With A Loan
There are some risks associated with trading a car with a loan. Considering the risks can help you decide if trading in your car is the right decision right now:
- Taking out another car loan could stretch your budget.
- Getting into more debt could put you into negative equity. The Federal Trade Commission explains negative equity in this article.
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Ask The Dealer For A Check
The solution might sound far-fetched, however, according to Ari Janessian an auto broker and Youtuber you should be able to show the offer from Carmax or Carvana to the dealer that youre working with, and if they are unable to match the offer, then you can ask them for a check for the difference that you still owe.
That means that if you still owe $15,000 on your current car and Carmax offers you $12,000, then you can ask the dealership that youre working with for a check for $3,000 so that you can sell your car to Carmax outright so that nothing is owed on the car, and then have that extra $3,000 rolled onto the new loan of the car that youre buying.
It almost sounds too hard to believe, but the dealer has the money to do this type of transaction and it doesnt really matter to them since youll be paying the difference back on the loan anyway.
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How To Get The Most Money For A Trade
The next question people often ask about trading in their used car or truck has to do with getting the most value they can from it. While there isnt a lot that people can do to dramatically increase the trade in value, there are some small but smart things that you can do to help. Here are some basic tips:
- Always perform the recommended manufacturer maintenance when required and have the receipts to prove it
- Regularly wash the exterior and keep the interior of the vehicle clean
- Repair vehicle damage
Useful Tip!
How Soon Can You Trade In A Financed Car
Determining when to trade in a financed car all comes down to how long your loan agreement is.
âYou are financing the price of the car and the taxesâyou need to remember that,â said a financial and insurance manager at a Montreal Subaru dealership. âIf you want to walk away, youâre paying those taxes. And if you walk away early on a 60-month loan, letâs say, then you are in a negative equity, only paying the taxes so far.â
You can trade in a car at any point in the loan, but the remaining balance will determine whether youâll have positive or negative equity.
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When You Buy A New Car You May Want To Get Rid Of Your Old One Which Means Trading In Your Car May Be The Ideal Solution
Usually, when you trade in your car, a dealer buys your old car from you and you buy a new car from them.
If youre trading in your vehicle, there are steps you can take to help make sure you get the best offer for you. Every dollar counts, especially if you plan to finance your new car more money for your trade-in can mean youll need to borrow less. Its also important to consider the potential benefits and drawbacks of a trade-in versus selling your car privately.
You could just take your used car to any dealer, see if they want to buy it and then sell it to them if they do. But taking the time to do your homework could pay off.
Its also important to consider the potential benefits and drawbacks of a trade-in versus selling your car privately. Here are some steps to consider before you trade in your car.
What Youll Need For A Trade
Logistically speaking, there are a few key things youll absolutely need to consider to successfully trade-in your vehicle.These are our top 3 things to help you feel ready-to-go when you step foot into our dealership:
Well give you all the details on three ways you can get cash for used cars and how to prepare your car for the final sale.
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Does My Car Loan Disappear If I Trade In My Car
Your car loan doesn’t disappear if you trade in your car. However, the trade-in value of your car becomes credit towards your loan. This credit might cover the whole balance. If it doesn’t, your dealer will roll over your loan, combining the deficit with the amount owing on your new car. Consolidating what you owe into a single new loan helps you manage your payments better.
The Do’s And Don’ts Of The Trade
You’re getting ready to buy a new or used car. The car you currently drive is in good shape and might have some value to it. Should you sell it yourself or trade it in?
If you want the most possible money for your vehicle, you’re better off selling it yourself. Potential buyers are not as well trained in car valuation as the pros, and they’re not always trying to eke out every bit of a car’s value for resale, so you’ll likely get more money. However, this process takes time, and you’ll have to deal with strangers and perhaps put in more effort than many people are willing to invest. In fact, some 45% of all car purchases in 2019 included a trade-in, according to Edmunds data.
Trade-in offers are typically less than you’d get in a private-party sale because the dealership must factor in the cost to recondition the vehicle and make a profit when it resells it. The plus for car shoppers is that trading in your car can be very convenient, far more so than finding a private-party buyer. If you follow these tips, you can get the most for your car trade-in.
Trade-in offers are typically less than you’d get in a private-party sale because the dealership must factor in the cost to recondition the vehicle and make a profit when it resells it.
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Have Your Vehicle Appraised
Your goal now is to get an actual offer. We recommend getting an instant offer from Edmunds. All you need to do is enter the details of your vehicle and you’ll get a trade-in offer good for seven days. Use this offer as a baseline for your negotiating, or if you’re comfortable with the offer, you can take it to a participating dealership and skip the remaining steps below.
If you still owe money on the loan, and the vehicle’s appraised value isn’t enough to pay it off, this means you are “upside down” and you’ll have to pay the difference out of pocket. If you’re not prepared to pay the difference on your car loan, trading the vehicle in at a dealership might be a better option. Keep in mind, however, that if you roll that balance into a new loan, you’ll begin a negative equity cycle that is hard to break out of.
Keep in mind that the trade-in price you’re offered at the dealership can vary depending on a number of factors including the car’s condition, the dealer’s current inventory, and the likelihood the car will sell. There may also be special promotions around trade-ins. More about that later.
If you have a Edmunds appraisal, you will already have a reference point to compare the dealer’s offer to. If not, you might want to try to get appraisals from two dealers.
Appraiser Will Assign A Value To Your Trade
After determining the value of your trade-in, he will now subtract money for any discrepancies he may have found while appraising your car.
Once the used car manager is done with the appraisal process of your trade-in he will call the new car manager or whoever is working your car deal. He will give that person the Actual Cash Value of your trade.
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The Problems With Negative Equity
The difference between what your vehicle is worth and how much you owe on it is known as equity. But when your loan balance is higher than the trade-in value of the car, this is known as negative equity . Negative equity is quite common these days where vehicle prices are high and long loan terms are common due to depreciation, interest charges, and other factors.
If and we emphasize “if” the lender allows you to trade in a vehicle with negative equity, the difference between what you owe and what your car is worth isn’t going away. Instead, the balance will be rolled into your new loan, which causes a few problems:
For these reasons, it’s recommended that you avoid rolling over negative equity into a new auto loan unless you can cover the balance out of pocket. If you can’t, you’re better off waiting and making payments on your old loan until you either get in an equity situation or have paid off the loan.
Dealers Buy Cars At Wholesale Including Yours
Dealerships buy cars at wholesale and sell them at retail. Fundamentally driven by the notion of buy low and sell high. There are no illusions to this gig.
So whether you realise it or not, when you trade-in your car to the dealer you are actually selling it at wholesale price for it would not make sense that a dealer would purchase your car for more than what they can acquire a similar car at a wholesale auction.
The wholesale prices change by following the same basic supply/demand reasons. For example, when the 2011 Fukashima Daiichi nuclear disaster derailed Japanese car production, the wholesale prices for used Japanese cars went up. Or when the Covid-19 pandemic hit our world, we saw a material shortfall in motor vehicle production in Europe and Asia alike and we saw a surge in demand for second hand/used/pre-owned cars across the board .
There is a barrier to having direct insight into current wholesale pricing as it requires a real macro view of the market including a technical and fundamental understanding of price drivers and indicators. Fortunately, with CarChase Insights by your side, you not only get a good idea of what a fair trade-in value is for your car but also opening the option to confidently to sell privately for greater optionality and negotiating with leverage.
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Research The Value Of Your Trade
As soon as you buy most cars, their value begins to depreciate. Websites like Kelley Blue Book and Edmunds allow you to input information about your car, like make, model, mileage and condition, and receive an estimate of the fair market value of the car. Knowing how much your car is worth can help you get a sense of what a dealer may offer for your trade-in and negotiate a trade-in price.
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