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When you buy a new car, you may decide it’s also time to trade in your current vehicle.
You can trade in your vehicle by selling it to a dealer — the one you’re buying a new vehicle from (if you’re buying a new car) or to another auto dealership. If you trade in your car to the same dealer you’re buying a new vehicle from, you may be able to get a credit for the value of the trade-in to reduce the amount you’ll owe on your new vehicle.
Trading in your vehicle can be a confusing part of the car-buying process. Here are some tips to help you assess your car’s value before you head to the dealer so that you can get the best trade-in price possible for your vehicle.
How do you get a good trade-in value?
- Research your car’s value so that you know if an offer is fair
- Make simple fixes before taking your car to a dealer
- Get quotes from several dealers
- Negotiate your trade-in price separately
While trading in your car can be a simple way to get rid of your old vehicle — you avoid the hassle of finding a private buyer — you may not get as much money for it as you would selling it to a private party. After all, the dealer wants to make a profit on the car, so it’s not likely to pay the car’s full retail value.
But while you may not get top dollar for your trade-in, that doesn’t mean it’s impossible to get a fair price. The key is to do your research before you head to the dealer — it’ll be hard to know if you’ve gotten a fair offer if you have no idea what your car is worth.
Is trade-in value the same as fair market value?
Your car’s trade-in value is the estimated amount you can expect to receive from a dealer for your car. The fair market value is the value of your car if you were to buy it today. The trade-in value may be lower than the car’s fair market value because the dealer will need to cover the costs to inspect and recondition the car before selling it.
Fortunately, there are many resources to help you figure out what your car would be worth on the open market. You can use Kelley Blue Book, Consumer Reports, Edmunds, NADA Guides and online classifieds to research the estimated value of your car, based on factors such as its make and model, location, condition, optional equipment and mileage. And if you can find similar vehicles in your area that have recently sold, this could also help validate — and give you leverage to negotiate — the price you think the dealer should pay for your car.
If you have data showing your car is worth more than the dealer is offering, the dealer may be much more likely to raise the price it’s willing to pay.
It may not be worth making major repairs to a vehicle before you trade it in. But making small fixes — like touching up scratches and dings — can be worthwhile.
Washing, waxing and detailing your car before taking it to the dealer can help your vehicle make a good impression when the dealer gives it a once-over before arriving at an offer. A good detailer can eliminate odors and dirt that may downgrade your vehicle from excellent or good condition to fair or poor condition.
You don’t have to trade in your vehicle to the same dealer you might be buying your new car from. You should get quotes on your trade-in from several car dealers to see which one makes you the best offer.
Try to get written appraisals from several dealers so that you can compare offers and use them to help you negotiate.
When you’re buying a new car from the dealer you’re doing the trade-in with, it’s a good idea to negotiate the price of the trade-in separately from the price of the new vehicle. That way, you can work to get the best price on each part of the deal.
If you’re trading in your car to the same dealer you’re buying a new vehicle from, it’s a good idea to have the value of your trade-in listed separately in your loan paperwork. That way, you can check to make sure that the trade-in amount is being properly deducted from your purchase price.
If you owe more than your car is worth, you may want to think twice about trading it in. When that’s the case, you may be tempted to roll the outstanding balance on the old auto loan into the new loan — which could require you to borrow more than the new car itself is worth.
Understanding the trade-in value of your car is important to helping you get a reasonable price for it. Research prices before taking your trade-in to a dealer, and make sure you negotiate the trade-in price for your car separately from the purchase price of a new vehicle. While it does take a little work, cleaning up your car and researching vehicle prices before heading to the dealer can help you get a fair price. Ultimately, that could mean more money to put toward a new ride.
For more trade-in tips, check out our article on how to trade in a car.