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How Do You Trade In A Vehicle?

Updated on February 9, 2018
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Dr. Penny Pincher founded the popular personal finance blog Penny Pincher Journal in 2013 and has published two books about saving money.

Car dealers allow you to trade your old vehicle for a new one. Of course, your old vehicle is not worth as much as a new one, so you'll have to make up the difference in price. The dealer effectively purchases your old car- the trade-in- as part of the transaction of buying a new car.

For example, if you are buying a new car for $30,000 and the dealer gives you a trade-in allowance of $10,000 for your old car, you'll owe $20,000 for the new car. A trade-in is an easy way to sell your old car at the time you are buying a new car.

Trade in value is less than the price you could get if you were to sell the car yourself. You pay for the convenience of a trade-in. The dealer will sell your trade-in for a profit, either by selling it at the dealership, or by selling it at a vehicle auction.

How to Trade In a Vehicle at a Car Dealer
How to Trade In a Vehicle at a Car Dealer | Source

How to Trade In a Vehicle

When you are purchasing a vehicle at a car dealership, the salesman will ask if you have a car to trade in. The dealership will perform a quick inspection of your vehicle to determine its trade-in value. You can also check the book value for trade in vehicles at sites such as Kelly Blue Book and NADA Guides. The dealer will use similar pricing information to determine the trade in value of your vehicle.

The main factors in determining the resale value are the age of your car, the number of miles, the condition, and the make and model. The dealer will determine a price that allows your vehicle to be sold at a profit.

The vehicle will also be checked for any mechanical issues that could affect its value. When trading in a car at a dealership, it is not necessary to prepare the car for sale. Car dealers are good at evaluating the condition of vehicles and will not be influenced much by a clean vehicle vs. a dirty vehicle. However, you should pack up your belongings and clutter if you are thinking about trading in your vehicle- it is much easier to do this at home than at the dealer!

Can I Trade-In a Vehicle If I am Making Payments on It?

If you are still making payments on a vehicle you can trade it in. Financing for the purchase of the new car will include paying off your old car. The trade-in allowance will be the trade-in value of the vehicle minus the balance you owe. For example, if your vehicle trade-in value is $10,000 and you owe $6,000 you would get $4,000 toward your new car by trading in your car. The $6,000 that you owe would be paid off by the dealer as part of the transaction.

A Car Dealer will Sell your Trade In for a Profit
A Car Dealer will Sell your Trade In for a Profit | Source

Can I Negotiate on the Trade In Price?

Yes. Check the Kelly Blue Book or NADA Guides trade-in value so you know if you are getting a fair offer for your trade in from the dealer. You should get at least book value for your trade in.

You may be able to negotiate the trade in price slightly higher than book value, especially if your vehicle is in high demand for resale. However, you will probably not be able to get much higher than the trade-in book value. A good strategy is to negotiate both on the trade in price and on the new car price to get the best deal overall.

You Can Get more than Trade-In Value if you Sell a Car Yourself
You Can Get more than Trade-In Value if you Sell a Car Yourself | Source

Should I Trade in my Vehicle or Sell it Myself?

This comes down to a question of time and money. It will take time to sell a car yourself- probably weeks. You will need to spend time advertising your car and showing it to potential buyers. In exchange for this, you will probably get thousands of dollars more by selling the vehicle yourself rather than trading it in to a car dealer. If you are comfortable answering questions about your car and have time to show it to buyers, it may be worth trying to sell it yourself.

Advantages of a Trading in Your Vehicle

  • Easy- the dealer does the work of marketing and selling your car
  • Quick- the trade-in is immediate

Advantages of selling a vehicle yourself instead of trading in

  • More money- you will likely get thousands more if you sell the car yourself

© 2013 Dr Penny Pincher


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