How To Trade In A Car

Got a car you just want to get rid of, sell, or trade-in? It really doesn’t matter whether it’s an old car or just one you simply can’t afford anymore – you have dozens of options. With the used car market booming, dealerships are even cold-calling and sending out letters to find owners who are willing to trade-in or sell their current vehicle.

How To Trade In A CarIf you are willing to put in the time, you can put a “For Sale” sign on your car or list it on Craigslist,,, etc. Many consumers believe that they will get more money for their used car by selling it privately than they will when trading in, and chances are, they are right. A simple Kelley Blue Book analysis will show you that a private party transaction will, on average, net you $1,000 to $2,000 more.

Nonetheless, marketing a used car can be a hassle, time-consuming and can take weeks or months to sell, so any calculation of money should always include the value of your time and how much of yourself you are investing in an endeavor. On the flip side, you can easily trade in your car and buy a new one. Informed and well-prepared consumers get the best deals on trade-ins, so if you are planning to buy a new car, do your research before deciding whether to sell or trade your current vehicle.

If you decide the latter, then research how to trade in a car to get the most out of the deal. It is also important to learn the strategies and tactics dealers may use to negotiate when you trade in your car.

Trading In A Car – Think Ahead

We all know that some car models hold their value better than others, so if you plan to replace your car in 3, 5 or 7 years, choose a model that is likely to have the highest trade in value. Popular and reliable car make and models hold their value the best because they will always be in demand (see the list below).

At first glance, sales managers will check out the mileage and condition of the body by doing a general walk-around. Dealers look for paintwork, dents, interior quality and upkeep, maintenance under the hood (fluid levels, transmission, power steering, oil) and tires. High mileage detracts from the value of a used car so if you drive a lot, expect to get less. Smoking in a car reduces its value because smoke leaves a residue of tar and burn stains. If you have been involved in an auto accident, be forthcoming and honest since most managers will pull a Carfax history report and get in-depth details on the incident.

Best Car ValuesWorst Car Values
Toyota Camry and PriusMercury Grand Marquis
Honda Accord and CivicFord Crown Victoria
Scion xBBuick Rainier
Mini CooperFord Explorer
BMW M3Dodge Caravan
Lexus RXRange Rover
BMW 6-SeriesGMC Envoy
Acura TSXSaab 9-3
Scion xAChevrolet Cobalt
Toyota TacomaFord Taurus
Before making an offer on a trade in, dealerships will request a Carfax to find out if the car has been involved in any accidents. With cars less than 7 years old, even repaired accident damage can lower the value of the vehicle. In accidents where another driver was at fault, many states require that car insurance companies pay for loss of value on late model cars. The loss of value payment is meant to compensate the owner for the lower resale or trade-in value of the car.

Choose The Same Car Maker

Car dealers tend to offer more for trade-ins if the car is the same make and model that they sell. Ford dealerships offer more for Fords than they do for Kias, Hyundais or Toyotas. This is because, after purchasing a vehicle, dealerships have two options – either sell the car on their own lot or sell it at auction. At auction, the automobile will be sold at a wholesale price, meaning less profit for the dealer, so your best bet is to offer the dealership a vehicle they can sell on their own lot or is in high demand (no sales manager wants an unpopular make and model sitting on their own lot for months, taking up precious real estate). Another factor to consider is the product mix on the lot and in inventory. If you see 10 black Camrys or Hondas on the lot and you are trying to trade-in another white Camry or Honda, the dealer won’t offer as much for your vehicle.

The color can also affect its desirability so if your current car is pink or purple, it will likely bring a lower offer than an identical one in blue, black or white. If you replace your cars regularly, develop a relationship with a dealership. Dealers tend to give better deals to repeat customers since they expect to sell more cars to them in the future and don’t want to ruin the relationship. Just remember that, at the end of the day, this is business – you are not there to make friends and lose out on thousands of dollars.

Show The Car At Its Best

Trade-In Value - Show The Car At Its BestBefore asking about your car’s trade in value, make sure to take it to a car wash, clean the interior, and repair any minor damage. Many commercial car washes offer a detailing service that includes shampooing carpets and upholstery and waxing the exterior. Dealers look for clean cars and if the car is detailed before it is traded, it saves the dealer time and money. Minor mechanical issues should also be addressed – a check engine light or maintenance reminder is a red flag to anyone interested in buying or trading a car. It will raise suspicions about the car’s maintenance history as well as the types of problems that may be lurking under the hood.


Most consumers know that the best deals on new cars are available just before and after the next model year is released by car makers. Dealerships are anxious to move last year’s models to make room for the new ones. If you come in during the “End of Year” clearance, dealers may give higher prices for trade-ins to ensure a sale. For consumers, this can be a win-win situation since they will likely pay less for their new car while getting more for their trade in.

However, be careful, as this is not a sure thing. The reverse argument can be made as well – since car sales are hot at year-end and during the summer, sales reps won’t be as aggressive to get your business because they know there will be hundreds of other consumers walking onto the lot that may be easier to sell to.

The most important thing about timing is, do not visit a dealership when you are in desperate need of a new car. If you are thinking of trading in a car within the next year, start research right away. Talk to the sales manager and have him quote you on a figure – make him investment time with you so, if you walk away from a deal, you have cost him time with other potential buyers. This will incentivize him to try harder to make the sale. Just don’t be unreasonable about it.

If the car is worth between $5,000 and $6,000, and you are asking for $9,000, no dealer will ever bridge that gap. Trade-in values have some wiggle room, but not that much. Figures are really dependent on auction prices and historical used car prices, and most dealers aim to profit about $1,000 to $2,000 per unit. Similarly, consumers can use these tactics when negotiating to buy a used car.

Advantages – Lower Sales Tax

Before you decide to sell your car privately, you may want to consider the sales tax on a new car. Most dealers simply deduct the amount of the trade in from the price of the new car and in the majority of states, the buyer only pays the sales tax on the reduced price. For example, if the car you are buying is $25,000 and you receive a credit of $10,000 on your trade-in, you only pay sales tax on $15,000. If the state sales tax is 7%, you just saved $700 by trading in your car, effectively giving you a trade in value of $10,700. The other benefit is that you will only have to get a car loan for the final purchase price – $15,000.

Car Loans and Trade-Ins

Car Trade-In ValueMany consumers owe more on car loans than the trade-in value of their car. While auto finance companies will often add the balance of the old loan to a new car loan, dealerships will not offer more than the trade-in value. If you cannot afford to pay off the loan using the proceeds, it may be better to postpone buying a new car, since adding the balance of the old car loan to a new loan will still leave you owing more than your new car is worth. This means you will be faced with the same problem and an even bigger loan balance the next time you want to buy a new car.

Simply put, if you haven’t paid off your existing car loan or will not be getting a trade-in value close to what you owe, it may not make financial sense to buy a new car yet. Car loans payments are not investments – there are many other uses of cash that will actually build you wealth. My personal financial outlook for car purchases is: even if I am going to finance a purchase through an auto loan, I will not buy a car I can’t afford to buy all in cash.

Should You Sell or Trade?

Before making a final decision, it is wise to take your car to several dealerships and compare offers on a trade in. Balance the trade in value of the car against the time you will undoubtedly spend placing advertisements, answering phone calls and setting up appointments with potential car buyers. Most buyers will not offer the asking price and will try to negotiate a better deal, and it may take a while before the right buyer comes along. Trading a car is quick and a car owner does not have to spend hours marketing the car.

Trade-In Car Value

There are many variables that affect the trade in value of a car, and owners with older model cars often get more money for the vehicle through a private sale. If you have a late model car, a trade in may be a better deal since it saves time, cuts the amount of sales tax and gets you in a new car right away.