How To Trade In a Car

You’re about to start the car buying process. Which likely means you’re 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 doesn’t care as much about that as a new-car dealership does.

But then you’d 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. It’s simpler and easier to trade in your old car, but you’ll 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.

Determining the Value of Your Car

The process of trading in your car starts with determining how much your car is worth. First, take a hard look at your vehicle, eliminating any personal positive or negative feelings that may have arisen over the years. Is it too small? Not for somebody needing a small car. Too big? Somebody needs that carrying capacity. Too thirsty? A matter of opinion. The wrong color? See “too thirsty.” None of those are legitimate factors regarding trade-in value.

Factors that are legit: How many miles? The lower the better. How clean is it? It should be as clean as you can get it, or lacking that, have it professionally detailed – never try to trade in, or for that matter sell to a private party, a vehicle that needs a bath, a vacuuming, or has overflowing ashtrays. You’d be surprised at how many people ignore that advice and pay for it in reduced trade-in value for their current car.

So, what kind of shape is your old car in? Be honest. There may be great sentimental value in the fact that your third child was born in the back seat, but it doesn’t raise the value of the car. You must be clinical about valuing your trade-in. And don’t take it personally if a salesperson test-drives your car and proceeds to tell you everything that’s wrong with it. He or she may be setting you up to take less than it’s worth, but if you’ve done your research, hold your ground.

Several websites, including Edmunds (Edmunds.com) and Kelley Blue Book (kbb.com) have valuation tools that will give you a ballpark estimate on the value of your car. Again, be honest – you might be able to overlook some small rips in the upholstery, but a buyer or dealer won’t. Some valuation tools offer an estimate specifically for trade-in value, but that’s just what it is – an estimate.

It’s worth noting that used car depreciation hasn’t followed normal patterns recently. Average used car values have actually gone up by approximately 30 percent in the past 15 months, which means your car is likely worth more than you think.

It’s also worth searching sites like craigslist.com or iseecars.com for used vehicles like yours to see what the asking prices are. Give yourself a spread of a few years, such as searching for 2011-2013 Ford Explorers, if yours is a 2012. Subtract 10-15 percent off the asking price, and that is more than likely the real-world price of the car when it changes ownership. 

What’s Your Auto Loan Status?

Also worth researching is the value of your trade-in versus what, if anything, you owe on it, also known as your loan balance. Hopefully your loan amount is lower than the value of your car, meaning you have “positive equity”. You can trade in a vehicle you are “upside-down” on, meaning you owe more than it is worth, or have “negative equity”. But the payoff amount for your old loan will be deducted from what you are offered by the dealership.