How to trade in a car

Couple looking inside car at showroomImage: Couple looking inside car at showroom

In a Nutshell

When you buy a car, you may decide to trade in your old one. If your car is worth more than you owe on it, you may be able to use the difference toward the purchase price of a new vehicle. Comparing offers from various dealers and negotiating can help you get the most money for your trade-in.
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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 you’re 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 you’ll need to borrow less. It’s 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.

It’s 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.

1. Research the value of your trade-in vehicle

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.

2. Determine whether you still owe money on your current car

You may be upside down, or have negative equity, on your car loan. When you have negative equity, you owe more on your car than it’s worth. In these cases, you may still be able to trade in your car. But the outstanding balance on your old auto loan could be rolled into your new car loan, which can increase your monthly payment and potentially make you even more upside down.

3. Get an estimate from several dealers

Getting multiple estimates can help you make sure you get the best price. You can get estimates from the dealer where you’re considering buying your vehicle, as well as from other dealerships that sell your car’s make and model. For example, if you have a Toyota, your local Toyota dealer may be willing to buy your vehicle back from you. Consumer Reports also suggests taking the vehicle to a used-car dealer, because they’re often looking to buy well-kept vehicles with low mileage.

Pay close attention to any special offers the dealer provides and read the fine print carefully. Some may guarantee a certain value for your trade-in, even if it’s in poor condition. Others may claim they’ll pay off your loan, no matter how much you owe on it, when you trade in your car. But if you’re underwater, they may just roll over your negative equity into your new car loan. Do your research and ask the right questions when an offer seems too good to be true.

4. Negotiate your trade-in price

You don’t have to accept the first offer the dealership makes on your trade-in vehicle. You can counter-offer with a higher trade-in amount. Dealers often begin with a low-ball offer.

And if you plan to buy a new car from the same dealership that’s buying your old car, make sure the dealer doesn’t mark up the price of the new vehicle to make up for the trade-in amount they gave you.

5. Close the deal

Once you’ve agreed on a price for your trade-in, it’s time to close the deal. If you’re buying a new vehicle from the dealer and getting a credit for the trade-in value, make sure this is clearly listed in your contract and that the right amount has been deducted from the price of your new vehicle.

If you’ve sold your car to a dealer but aren’t buying a new one right away, you’ll likely get a check for the value of your trade-in, which you can opt to use as a car down payment there or anywhere else. 

While this process can take time, it can help you get the most money you can when trading in your car — after all, it may be worth thousands of dollars.

Pros and cons of trading in your vehicle

Trading in your vehicle comes with some benefits and drawbacks. Depending on your financial situation, you may decide that selling your car on your own may make more sense.


You don’t have to deal with trying to find a private buyer for your vehicle and scheduling test drives or inspections. You just take your car to a dealership.

Also, if you live in a state that charges sales tax on the purchase of a new vehicle, you may only pay sales tax on the difference between your trade-in value and the price of the car you’re buying.


You may be able to get more money if you sell your car to a private buyer. Dealers won’t likely pay the sticker price for your car because they need to be able to sell it at a profit. Instead, they may offer you the wholesale value, the cost a dealer would pay to buy it from a car manufacturer — or even a little less.

Next steps

If you’re ready for a new set of wheels, it’s time to buckle down and do some homework.

First: Compare your trade-in offers to what you could likely get for selling your car on your own. Consider the difference, along with the pros and cons of trading in your car, to decide whether a trade-in is right for you.

If you do opt for a trade-in, here’s what to do next.

  • If you’re upside down on your current car loan and thinking about rolling the loan balance into a new car loan, make a plan so that you’re in a good place before taking on a new car.
  • Take a close look at your finances and your budget to help determine how much car you can afford.
  • Do your research and compare offers to help make sure you get the most money possible to use toward your new car.

About the author: Christy Rakoczy Bieber is a full-time personal finance and legal writer. She is a graduate of UCLA School of Law and the University of Rochester. Christy was previously a college teacher with experience writing textbo… Read more.