|$ $ Trade-in Value: $1,000-$4,000 less than market value.
When people decide to buy a new car or change the car they have for another one, a great concern for them is knowing what to do with the old car they have.
Trading in a car is a great solution for many car owners because it can be used as part of the payment of the new vehicle when buying it of a dealership.
Although trading in a car doesn’t always get the best deal, the process in many ways can be more convenient for many car owners than trying to get rid of it by themselves, and for that reason, many prefer it.
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What Does Trading A Car Mean?
Trading in a car means that when you are trying to buy a new car at a dealership, you offer them your old car for an agreed amount of money to finance the new vehicle.
The vehicle you offer to the dealership turns into the “trade-in object,” and the amount of money agreed on between you and the dealership is called “trade-in value.”
The trade-in value that you got from your old vehicle is then applied towards the vehicle you want to buy or lease.
The Car’s Equity
When trading in a car there’s a thing car owners need to take into consideration, which is their old car’s equity.
The vehicle’s equity refers to the resale value of the vehicle you want to trade in, minus the amount of money you owe on it.
Then, if the car is worth more than the debt you have with it, it has positive equity, but if your current car loan is higher than your car’s value, then the car has negative equity.
For example, if you have a vehicle with an $8,000 value but still owe $10,000 on your car’s loan, it has a $2,000 negative equity, but if you only owe $3,000 then the car has a $5,000 positive equity.
Having negative equity is not advisable when trading in a car, and it means you are upside-down or underwater on a car loan, which can lead you to more monthly payments for the new car and pay more in interest.
If you trade in your vehicle having positive equity on it, then the extra amount will be deducted from the negotiated value of the new car, lowering the monthly car payments.
But, if you try to trade in the vehicle with negative equity on it, the dealer can agree to pay off the loan and then roll the same amount to the new car’s value, increasing the monthly car payments.
What Affects The Price Of Trading In A Car?
Before trading in a vehicle, the dealer needs to assess the car; the dealer will look at the car’s condition and consider everything from wear, tear, years, and mileage to evaluate it.
According to US News, there are several things a dealership appraiser will look at:
- Vehicle Age.
- Vehicle Condition.
- Matching Tires.
- Options and Add-Ons.
- Mechanical Condition.
- Seasonal Demand.
- Paint Color.
Then, after the appraisal, the dealer will give you a trade-in offer, which is liable for negotiation; after both parties agree on the price, the amount is deducted from the new car’s value.
There exist online pricing guides that can help you estimate your car’s trade-in value; the Kelley Blue Book, NADA, Black Book, and Edmunds also offer great tools to estimate the value of any vehicle.
However, typically the trade-in value of a car is usually lower than its market value, usually $1,000 to $4,000 less than the market value; the reason behind this is due to the dealer business.
Other factors that can affect the trade-in value of a car are the time of the year, the current demand for that particular year, the make and model of the vehicle, and what the dealer has on the lot.
What Do You Need to Trade in a Car?
There are certain requirements and documents you will need to trade in a car, which includes:
- Vehicle registration.
- All vehicle keys.
- Vehicle title.
- Car loan payoff plus account information.
- Maintenance records and receipts (not obligatory).
- Original owner’s manual.
- Pay for any outstanding parking tickets.
How to Get the Best Trade-In Price?
According to NerdWallet.com, the best tips to get the highest amount of your trade-in are:
- Find the trade-in price.
- Give your car curb appeal.
- Shop your trade-in.
- Negotiate the trade-in price separately.
- Don’t forget about sales tax.
- Review the trade-in price in the contract.
Things To Consider
- First, after looking for a dealer and knowing the type of car you want, start looking online for price estimations of the car you want to trade-in.
- Then, before starting a negotiation with the dealer, check the condition of the car your car. Look at the paint and bodywork for signs of damage, check the fluid levels, and run the vehicle’s VIN through Carfax.com to get a vehicle history report.
- Remove any personal items and clean the car. Typically, auto detailing is done before taking the trade-in vehicle for appraisal.
- After estimating your car’s value, get a quote from the dealership. Be aware of possible scams and dealers giving up a trade-in price without looking at the vehicle.
- Get all the documents you need for trading in your car ready.
- When you are trading in your car, the dealer is responsible for covering all the paperwork of the transfer of the vehicle.
- After trading in a car and getting a new vehicle, you need to get car insurance on the new vehicle. Some insurance companies extend the policy to the new vehicle for up to 4 days, but this doesn’t apply to all insurance companies.