Trade-In Tips: What You Should Know Before Trading In Your Car
Advice from an auto expert on everything from researching vehicle values to prepping your car for an appraiser.
Capital One
Originally published on March 19, 2019Â Updated August 17, 2020
Rather than treating your current vehicle as an afterthought when trading it in at a dealership for a new ride, see it as the opportunity it is to maximize its value. It’s possible your old car may be the most valuable asset you have when it comes to reducing the overall cost of your new auto loan.
This checklist covers everything from giving your car a glow-up to balancing the benefits of repairs to understanding how to trade in a car with a loan. Following these steps could help you boost your trade-in value and also save money on sales tax.
Rule 1: Consider Doing Small Pre-Trade Fixes
Nobody wants to waste money fixing a car they're about to trade in. You might even be shopping for a new vehicle because your current one needs some work. So it's time to assess any looming maintenance or necessary repairs, especially if those are becoming more commonplace.
If you can tackle easy fixes, those may increase the value of your car at trade-in. Consider things like:
- Cleaning dirty headlights and replacing bulbs.
- Repairing cracks in your windshield.
- Replenishing car fluids.
- Fixing minor scratches and dents.
Rule 2: The Power of Paperwork and Maintenance History
Modern vehicles might be more reliable than ever, but they still require regular service to keep them running at their best. If you've been following your car's recommended maintenance schedule, you've likely accumulated a stack of receipts: Think of this paperwork as your car's resume.
Having documentation that oil changes, tire rotations, and brake services have been completed on time is a great way to prove that you've taken good care of your car and mitigate any fears that it's been neglected.
Now, you may have simply stuffed your receipts into the glovebox over the years. But before you head to the dealership, take a few moments to organize them. Arrange everything chronologically, flatten any wrinkled receipts, staple related bits together, and place them into a folder. The goal here is to assemble a vehicle history the appraiser can easily flip through. This documentation can help ensure you get the best price for your car.
Rule 3: Dress Your Car Up in Its Best
Perhaps you're the type of person who bristles at the thought of eating in your car and keeps detailing spray at the ready, keeping your car in a state of perpetual cleanliness. Bravo! You can skip to the next section.
If not, well, you may have some work to do. It's time to give your ride a glow-up because showing off your car for sale in its best state may produce better results when trading it in.
Start with the interior cleaning. First, banish personal clutter, including phone cords, gym clothes, and that environmentally conscious stack of grocery bags. Then, hit the dashboard, door panels, and handles with detailing spray. Pay special attention to the nooks and crannies near the cupholders and ensure there aren't any lurking crumbs or coffee spills. Don't forget the interior windows, a streak-free shine is worth the extra elbow grease.
Give the exterior a thorough wash and wax. Just before you head to the dealership, wipe down the exterior with a high-gloss detailing spray to ensure an appraiser's first impression is a good one.
Rule 4: Know Your Car’s Value Before You Go to the Dealership
Before you go to trade in your current vehicle at the dealership, be sure you've done the research to understand its current market value. Don't guess or let the dealership set a baseline figure.
Finding a realistic value can be as straightforward as consulting one or more of the numerous websites that offer shoppers a clear picture of their car's worth. While some calculators work using general assessments, think "poor" or "excellent," of a car’s condition, others get more granular. Some can even use your vehicle identification number (VIN) or license plate number for increased accuracy. Run your vehicle through a few different tools and note the average value.
It's also smart to get an offer from a dealer that specializes in your make of vehicle. For example, if you're looking to get an offer on a Ford Bronco, take it to a Ford dealer. Because dealerships are familiar with their brand's vehicles and have specific diagnostic equipment, it's possible that they may overlook issues that dealers of a different brand, who are less familiar with the repairs involved, might quibble over.
Rule 5: Trading In a Car with an Existing Loan
Perhaps your circumstances have changed, and the sporty compact sedan you're currently driving needs to make way for a roomy SUV with all-wheel drive. Fortunately, it's possible to trade in a vehicle even if you're still financing it. How this shakes out financially depends on a couple of key factors, such as how much you owe and the vehicle's trade-in value.
To find out how much you owe, check your loan statement to see if it includes a payoff amount. You can also request a payoff quote from your lender or use an online loan calculator to determine the figure necessary to satisfy the terms of the loan. Keep in mind this total will change, as interest accrues daily.
In a best-case scenario, the payoff amount will be less than the dealer is willing to offer if you trade your vehicle in. This is called positive equity. For example, if you're currently making payments on a 2023 Toyota Camry that has a trade-in value of about $22,000 and the payoff amount is $18,000, the dealer will generally roll that $4,000 difference, your positive equity, into your down payment, reducing the amount you need to finance.
Less ideal is a situation where you owe more than the dealer is willing to offer for your trade. This is called negative equity, commonly referred to as being underwater. So if your Camry is worth $18,000 and you owe $22,000, that difference will be added to the amount you're financing.
In either case, the dealer pays off the loan from your current lender and you move forward with a new monthly car payment.
Rule 6: Strategize the Negotiation and Keep the Trade-In Separate
Many buyers want to address their trade-in value at the beginning of price negotiations, but some experts advise it could be better to treat them as two separate business deals.
One way to approach such a negotiation is to nail down the final purchase price of your new vehicle first. Once you have that figure in writing, then mention your trade-in. This can make it easier to keep the numbers straight if the salesperson starts shuffling between the trade-in allowance, down payment, monthly payment, and purchase price. Keeping things separate can help you clearly see the impact your trade-in value has on the bottom line, and confirm that you got a good deal on both sides of the transaction.Â
Depending on the state where you purchase your vehicle, your trade-in could reduce the amount you pay in sales tax. For example, if you buy a new Chevrolet Silverado for $55,000 in Houston and your trade-in is worth $25,000, the Texas sales tax rate of 6.25% is only applied to the remaining $30,000. That makes for a tax savings of $1,562. However, not all states allow this, so be sure to check the local rules governing these types of transactions.
The Value of Taking Your Time With a Trade-In
While it's natural to focus on a new vehicle, following this checklist to put time and energy into improving your current vehicle can yield financial benefits. The value difference between the Camry "good" and "excellent" example cited above can vary by more than $1,000.
John CoyleJohn has been in the automotive industry for nearly two decades. Over that time, he's driven Jeeps through Moab, tackled Fuji Speedway in a Lexus LFA, experienced the insanity of the Gumball 3000, and survived daily driving a 1978 Jaguar. He has served as editor-in-chief for AutoNation Drive, managing editor for Internet Brands Automotive, and events editor for CarDomain. When he rides his beloved Triumph Bonneville, he wears all the gear, all the time. He lives in Los Angeles with the coolest girl in the world and three black cats.
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