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 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 vehicles value.
Be sure to bring the vehicle registration, the title and all sets of keys. If you dont have the title because youre trading in a car that still has a loan, have the lenders details ready to hand over.
The Easiest Way To Find The Best Deals On Used Cars
Looking for something to replace your current ride? The easiest way to find a great car at a great price is CoPilot Compare, the search engine for nearly-new cars.Tell us the model youre looking for and well break down how much you save buying used vs. new. The best part? CoPilot searches all the dealerships in your area, then analyzes how good of a deal the listing is and how much it matches your preferences.The best listings in your area get delivered to you in a curated, personalized list – no more scrolling through hundreds of nearly-identical listings looking for the best deals.
Turn It In Turn A Profit
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When your lease is almost up, there are usually only two paths people consider. Most choose to return the car to the dealership. Others fall in love and decide to purchase the car outright. What you may not know is that in some cases you can actually build equity with your leased vehicle. Thats extra money you can use toward a new car.
Keep in mind that if you recently signed a lease, trading it in too early can be costly. Youll most likely owe more than the vehicle is worth after short-term depreciation. On top of that, you may also face early termination fees as outlined in your lease contract. In most cases, we recommend sticking it out until you have two or three months left on your lease.
If youre thinking about leasing and are on the fence, weve put together a comprehensive guide that covers pros, cons, and terminology. We also cover several of the most common fees you may run into at the dealership. Check out the TrueCar Leasing Guide here.
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Discover How Much Negative Equity You Have
Contact your lender or log in to your account to find out just how much you currently owe on the contract. Research the estimated value for your current car online. Compare the value to the amount that you owe. If the car is worth $15,000 and you still owe $20,000, that is $5,000 of negative equity.
How Vehicle Trade In Works
If youre looking to buy a new car and need to sell your existing one, a vehicle trade-in is probably one of the easiest options. Are you undecided on whether to sell the car privately yourself, advertise it in the classifieds, or trade it in? Here we explain the advantages and disadvantages of vehicle trade-ins and how it works.
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When You Should Wait To Trade In
It is best not to trade in your vehicle when you purchased it very recently. As soon as you drive a new vehicle off the lot, it loses around 10% of its value and up to 20% of its value within the first year. If you purchased a new, not used, vehicle within the last year and are thinking of trading it in, just dont. Whatever exciting deal or sweet ride you recently encountered can wait. Its not worth wrecking your financial future for a newer set of wheels.
You should also wait to trade in when you have prepayment penalties. When a lender agrees to a car loan, they are counting on earning interest off of you for a set amount of time. When you pay off a loan early, you are depriving the lender of this incomeand because of this, you will likely pay a prepayment penalty in most cases if you pay off the loan early.
You should also wait when time is on your side. If you own a newer car, you can always trade it in later or sell it to another private party, which would generally mean you would make more money off of the transaction.
Can You Trade In A Financed Car
Yes. Even though you are already paying the loan on your vehicle, you can swap it in for a new one. The person who takes your car off your hands will give you money in exchange, as much as any other trade-in.
In some situations, the lump sum would cover the outstanding amount on your debt, and you might even get a little extra that you can put toward your next purchase!
But first, you need to figure out how much equity you have in the car. Equity is the difference between the present valuation of your vehicle and the balance you owe on your debt. You have positive or negative equity based on those two variables that we will soon discuss.
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When Youre Looking To Get A New Set Of Wheels You May Be Anxious To Get Rid Of Your Old Car Even If You Still Owe Money On It
But trading in a car with a loan could cost you if you have negative equity, meaning you owe more on your loan than your car is worth. Lets take a look at your potential options whether you have positive or negative equity and how to trade in a car with a loan balance.
What Steps Need To Be Taken Before Selling A Financed Car
- Determine whether the vehicle is part of a secured, or unsecured loan
- Calculate how much you owe your lender for the original loan
- Factor-in any fees and interest rates
- Talk to the lender about any fees or costs for ending the loan period early
- Contact multiple car dealerships to get an idea of your vehicles agreed value
- Ensure the dealer is informed the vehicle is financed
- Determine whether paying more of the original loan before trading in could land you with more cash in your back pocket
- If upgrading to a larger, more expensive car, ensure you can cover the new repayments
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What Happens If Im Offered Less Money For A Trade In Than I Owe For A Financed Vehicle
If youre in a position that the money you owe for the vehicle youre planning on trading in is less than the value the dealership is offering you for a trade in, this is called negative equity. In the case of negative equity for a vehicle trade in, you have a couple of options.
The first option is to go ahead with the trade-in, and settle any outstanding debts for that vehicle with either some of your savings, a personal loan, or a combination of both. The second option is to contact finance lenders to see if youre able to add that slice of negative equity onto a new car loan, in the case that youre upgrading. One thing to keep in mind, here, is that lenders have limits to how much negative equity you can package into another loan, and may sometimes result in less than desirable interest rates, payment terms and fees over the course of that loan.
Vehicle Age And Loan Repayment
Cars depreciate rather quickly in the first year, but more gradually as time goes on. So the newer the vehicle is, the more value you’ll get out of it. For this reason, the car’s model year can play a big role in its trade-in value. After a certain point , your vehicle’s value will “bottom out,” so to speak, so you likely won’t see a significant difference if you wait longer than that.
Of course, you’ll also need to consider how much equity you have in the carthe difference between what you can trade in the car for and how much you owe. If you bought the car new and didn’t put much down or trade in a vehicle, you may be underwater on your loan, which means you owe more than it’s worth. In this scenario, you’d end up needing to roll over the remaining amount you owe into your new loan or directly pay the lender the difference.
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How To Calculate The Best Time To Trade In Your Car:
Imagine that you had a car that costs $30,000. During the next 3 years, the value is reduced to $15,000. If you take the difference between the original price and the current price, youre left with a depreciation amount of $15,000.
$30,000 $15,000 = $15,000
If you divide the depreciation amount by the number of months you have owned the car, you will find that you paid $416 per month in depreciation to own the vehicle.
$15,000 / 36 = $416
However, if you continue to own the vehicle for another 3 years, you may see the value of the vehicle will drop from $15,000 to $13,000. That means that for the next 3 years, you will only have paid $55 in depreciation every month.
$15,000 $13,000 = $2,000
$2,000 / 36 = $55
Ultimately, if you keep the car for 3 years, you lose $416 per month in value depreciation. But if you keep the car for 6 years, you only lose $236 per month.
$15,000 + $2,000 = $17,000
$17,000 / 72 = $236
This math shows that it makes more financial sense to keep the car longer. Keep in mind that losing money due to depreciation is not a complete loss. While it is money out of your pocket, you will also have use of a well-running car, a value that is harder to quantify but should still be a factor.
Cars typically lose value faster in the first 2 years of ownership. Once youve weathered that stretch, the value will drop much more slowly.
Do You Have Any Negotiating Power When Trading In A Car With A Loan
Maybe. If you have a very popular and desirable model, that might help. Also, if you owe very little on the old car, you will still have some negotiating room. Remember, theres no free money. The dealership is in business to make money selling things, not getting you out of a car where you previously overpaid.
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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 youll get a trade-in offer good for seven days. Use this offer as a baseline for your negotiating, or if youre 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 vehicles appraised value isnt enough to pay it off, this means you are upside down and youll have to pay the difference out of pocket. If youre 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, youll begin a negative equity cycle that is hard to break out of.
Keep in mind that the trade-in price youre offered at the dealership can vary depending on a number of factors including the cars condition, the dealers 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 dealers offer to. If not, you might want to try to get appraisals from two dealers.
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How Long Do You Have To Wait To Sell A Car After Buying It
If the vehicle is new, you should ideally wait until at least year three of ownership to trade it in to a dealership, as this is when depreciation normally slows down. If its used, it already went through the big drop in depreciation and you can usually trade it in after a year or so.
What is the best mileage to trade in a car?
Because depreciation is constant, its best to sell or trade in your vehicle before it hits the 100,000-mile mark. At this point, you wont get nearly as much for it because dealers generally see these cars as wholesale-only vehicles to be sold at auction.
Should I clean my leased car before turning it in?
Its in your best interest to use a cleaner and remove stains or hire a detailer to do it. It will probably be cheaper for you to have it done before returning a leased can than letting the dealer do it. Burns, water damage, and cracks/scratches in leather are also finable offenses, so have those repaired.
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You Recently Purchased The Car
The process of buying a car includes more than just the sales price of the vehicle. In most states, you’ll also have to pay sales tax and you may opt for add-ons, such as a service or maintenance contract, gap protection and more.
If you recently purchased your current vehicle, trading it in for a new one means you’ll pay many, if not all, of those costs again. If you find yourself frequently trading in cars you haven’t owned for very long, you might instead consider leasing a car.
Shop Your Trade Around To Different Dealers
After figuring out your cars trade-in value and the remaining loan amount, its time to head to the dealership. Dont just go to one and trade your car in there instead, its a good idea to shop your trade around. That means taking it to a couple of dealers, including Carmax, to see who can give you the best deal.
After getting the highest offer, you can then use it as leverage at the dealership where youre buying the new car from. Most times, the dealer can match or beat the offer to earn your business.
iSeeCars notes, Shoppers often assume once a purchase price is set, and the trade-in value is agreed to, the deal is done. But the deal isnt done until the paperwork is signed. In that regard, remember that you can walk away from the deal if you dont get the trade-in value that you want.
However, if your car is in poorer shape than you thought, theres a chance you will have to settle for a lower offer than you originally thought.
As a side note, we recommend cleaning the car before getting it appraised. Most car dealers will tell you that you dont have to, but its always good to put your best foot forward.
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Trading In A Car With Bad Credit
If you want to trade in your vehicle for a new one, but worry your bad credit will be in the way, turn to Auto Credit Express. We help car buyers get the financing they need by setting them up with local special finance dealers. The dealerships in our nationwide network know what it takes to help consumers get financed, even when they’re dealing with unique credit situations. Start the process by filling out our secure and free auto loan request form today!
And The Best Way To Do It
Some quick statistics that might surprise you:
- 85.4% of vehicles purchased in America are financed.
- The average length of a car loan in America is 67 months.
These staggering numbers coincide with the ever-rising price of the average new car as more and more Americans struggle to afford everything from higher rents to increased healthcare costs.
This means longer loans, lower interest rates, and higher-priced vehicles. Pair that with taxes, fees, and depreciation and you may find yourself owing more on a car than what its worth.
For many, the reality is that a vehicle may not fit their needs or wants for the duration of a loan. Whether youre looking at adding children to a family or persistent repair issues, there are a myriad of reasons why someone might want to trade in a financed car.
This article will tell you how soon you can trade in a financed car and the best way to do it.
The CoPilot app is the smartest way to buy a car. Search all listings in your area, get notified about deals, new listings, and price drops, or chat with one of our copilots for some hands-on advice.
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Options For Early Lease Termination
More than one option at lease end. Did you know that returning your vehicle to the dealer you leased from isn’t the only option when ending your lease? The important thing to remember is that your lease must be completed, or the car must be purchased if you’re planning on taking other routes.
Other options you have for ending a lease early:
