Are you considering trading in your existing car at a dealership before buying a new or used one? It is a sensible step because it can help you to dispose of your old vehicle and use the money you get for it to purchase a replacement. However, to get a fair price for your trade-in, you may need to spend time and conduct research so you can learn how the trade-in process works.
What Does Value Your Trade Mean?
Value your trade means getting an accurate appraisal of your old vehicle when you decide to trade it in for a new one. The car dealership that agrees to buy your old car from you will provide you with its valuation. If you find it reasonable and decide to go ahead with the sale, they will provide you with a purchase contract that shows the valuation amount. When you buy a new vehicle from that dealership, they will deduct this amount from the price of your new or used car.
Why Should You Trade In Your Vehicle With a Dealership?
Convenience is why you might want to trade in your old vehicle with a dealership. If you had to sell it on your own, you would have to advertise it at different places, communicate with prospective buyers, make time for test drives, and negotiate the price. Trading your car with a reputed dealer can save you this hassle. It also saves you from shopping around for a new car since you can purchase it from them.
Additionally, you may get a tax advantage on the trade-in in many states. Instead of paying tax on the full purchase price of the new car, you only pay tax on the difference between the trade-in price and the new car price.
Hacks for the Vehicle Trade-In Process
If you are financing your new car, getting more money from trading in your old one can enable you to borrow less on the car loan. Here are some suggestions to get the best offer:
1. Research the Value of Your Trade-In Vehicle
It is necessary to know the existing vehicle’s trade-in value to get a reasonable price for it. That means you must research current market prices for similar models with the same mileage and negotiate the trade-in price separately from the purchase price of a new car. Remember that vehicles start depreciating the moment you drive them out of the dealership’s lot. So, you lose up to 20% on the first day itself, and it decreases steadily from there, with a three-year car depreciating up to 65% of its original value.
That said, when you have a clear idea of what your vehicle is worth, you will know if the dealer is offering you a fair rate for the trade-in, and you may be able to negotiate a better trade-in price.
2. Determine the Condition of Your Trade-In Vehicle
The condition of your trade-in vehicle is a major factor in determining its value. If you have maintained it in top-notch condition and made a few fixes before trading it in, you may be able to negotiate a better price. It is necessary to mention again that, due to depreciation, its current value is likely to be a lot lower than what you originally paid for it.
3. Find Out What the Outstanding Balance Is on Your Current Car
Before you can trade in your old car, you must check if you have negative equity. You can do this by comparing what you owe on the car to its current value. For example, if your outstanding balance on the car loan for the vehicle is $8,000 and the current market value of the car is now $5,000, you have negative equity of $3,000.
If possible, pay off the negative equity before you trade in the car and apply for a new auto loan. You can add the outstanding balance to your new loan, which will increase your monthly premiums.
4. Get Price Estimates From Different Car Dealers
You can get an estimate on your old car from the car dealership from which you want to buy a new one and several other dealers who sell the same car model. For example, if the vehicle is a GMC model, you can ask your local GMC dealership if they are willing to purchase the car from you.
Also, if it is a well-maintained car with low mileage, you can inquire with used car dealers. By getting multiple estimates from different car dealers and comparing those with the car’s current market value, you can select the offer that gives you the best price for your trade-in.
5. Review the Car Trade-In Offers You Receive
Before you agree to any offer on your vehicle, take the time to understand what the trade-in offer entails. Some dealers may offer a specific set price for a trade-in, regardless of the car’s condition. That means even if your vehicle is in poor condition, the price will be the same as for a better quality one.
Other dealers may offer to pay off your outstanding loan on the car if you accept their trade-in offer. Be careful with that one. If you owe a lot, they may add the negative equity to the new car loan you take. So, be very clear about the trade-in details before you accept the deal.
6. Negotiate Your Trade-In Price
Car dealers often start the trade-in deal with a lowball offer. You will need to negotiate a higher amount. While you will not get anywhere close to what you originally paid for the car, you might get a price that matches its current market value. Be aware that some dealers may give you a reasonable price for your old vehicle and then try to make up for it by hiking up the price for the new car you are buying from them.
7. Complete the Trade-In Deal
After you and the car dealer agree to the trade-in price for your old vehicle, you can discuss buying a new car from them. The sales contract should clearly state the trade-in value. You should check if the dealer has deducted this amount from the new car’s price. Clean your vehicle inside and out before you trade in your vehicle.
As you can see, trading in your car can be a simple process if you select a reputed dealer and do your homework beforehand.
