If you’re looking to upgrade to a new vehicle or replace your existing vehicle, trading in your car might be a helpful option, but knowing how is important.
Maybe you want new vehicle features like parking assist, child safety features, or a rearview camera. Perhaps you want better fuel economy or need more room for your growing family. Trading in your vehicle for a new or used car may be the best option if you don’t want the hassle of selling it privately. It’s important to know how trading in a vehicle works to get the most out of your investment.
Determine whether you own, lease, or owe money on your vehicle.
If your car is worth more than you owe or if the car is paid off already, then you have “positive equity” and can negotiate a trade-in price with the dealer using the positive equity to reduce the overall balance of the new vehicle. If you owe more money on your car than it is worth, you have “negative equity.” The negative equity may be transferred to your new car loan or financing agreement. This will result in a higher payment for the car you plan to purchase . If you lease your vehicle, you may need to determine whether there are penalties or fees associated with trading it in.
Know the trade-in value of your vehicle.
Once you drive a vehicle off the lot, it usually depreciates in value. While this is not always the case when it comes to some vehicle makes and models, you’ll want to know your car’s trade-in value before visiting a dealer so you can negotiate a fair price. Websites like Kelley Blue Book and Edmunds allow you to research and receive an estimate of your car’s fair market value.
Get more than one estimate.
Once you know your trade-in value, it is important to get estimates from more than one dealer. Before you take your car to a dealer, it is a good idea to get a carwash and do some basic cleaning. Consider getting estimates from new and used car dealers. If you’re looking to trade your vehicle in at the same place you purchased it from, that dealer may be willing to offer you more for your trade-in or provide a customer loyalty discount. However, having more than one estimate will give you the power to negotiate for the best offer or research special trade-in offers.
Negotiate your trade-in offer.
Taking the first offer a dealer makes for your trade-in might not get you the highest outcome. Be sure to advocate for your car’s trade-in value and provide a counteroffer for the best deal. You should also ensure that the dealer does not increase the price of the new vehicle purchase to make up for the trade-in amount. For this reason, negotiating the purchase price of the new vehicle before discussing the value of the trade in.
Reach an agreement.
Once you and the dealer reach an agreement on the trade-in price and the new vehicle price, make sure you read your contract closely to ensure your payments are within your budget and the trade-in credit or balance transfer is correctly listed.
If you’re looking to trade in your vehicle and need help getting approved for financing to buy a new or used car, a dealer enrolled in the Credit Acceptance program can help! Credit Acceptance is an indirect auto finance company that works with more than 12,000 car dealers across the nation to help car buyers get approved for financing. Once you fill out the form on our website, we will connect you with three enrolled dealers in your local area that can help you start your credit approval to buy a car.
- Publish Date