One of the easiest ways to rid yourself of your old car is through a process known as “trading-in” your vehicle. In simple terms, this means using your car as collateral towards the lease or purchase of another vehicle. The money does not always have to be applied towards another vehicle—a used car can also be “sold” to a dealer for cash, in much the same process.
This overview of the trade-in process includes information on how to establish “trade-in values,” how to maximize the trade-in value, when to negotiate a trade-in, and it offers several good reasons to justify trading-in a used car.
Establishing “Trade-In Value”
The dealer will appraise, or estimate the value, of your vehicle for trade-in.
A popular misconception says that a consumer will get wholesale “Blue Book Value” (referring to the popular Kelley Blue Book, a company specializing in automotive pricing) for their trade-in. Unless you car is rare, or in high demand, this is never the case.
Dealerships will use several different third-party guides, auction prices, and current market prices (they often call other dealers for the “going rate” on trade-ins) to establish a trade-in value. They will always error on the conservative side, to ensure they are not buying a car for an amount of money that they cannot quickly recover in a sale or auction.
The trade-in value of your used car will be lower than you expect. It some cases, it will be several thousands less than what you can sell it for yourself. This means if you do your homework, and you think your Toyota Camry is worth $13,000 used, the dealer will most likely offer you $10,000. Be prepared for this.
Trade-in for Top Dollar
While we have established you will not get retail pricing on a trade-in, there are ways to increase the trade-in amount (or “trade-in allowance”) you do get from the dealer.
Understand that the dealer will accept nearly any car on trade. Even if it needs to be towed in on flatbed, the dealer can find someone (a parts dismantler maybe?) to buy it for $250. (Keep in mind, if that is the case the dealer will be offering you $100 for the trade!). The object is to maximize the amount you get from the dealer.
The key to maximizing value is presentation. Clean the car with soap and water, and do not forget to wash the windows, wheels, and tires. Remove all of the personal belongings, bumper and window stickers, and trash from the interior. Clean the seats and carpets. Two hours worth of work just earned you at least $500 more in trade-in value.
Negotiate the Trade Last
Trade-ins can muddy the deal. In simple terms, you do not want to find yourself in a position of negotiating the price on a new car, and simultaneously negotiating the trade-in value. Eventually, a transaction like this ends up “combined” by the dealer into a single-figure negotiation. At that point, it is nearly impossible to determine the actual discount on the new car, and the trade-in value.
Discuss the sales price of the vehicle. Then, discuss the trade-in.
A Few Good Reasons to Trade-in Your Car
As we have established, trading-in a used vehicle is rarely done for financial advantages. However, there are several other advantages to a trade-in. This is what makes them so popular.
Time - Selling a used car privately can take weeks, or months. In fact, you do not know you have sold it until just minutes before it is sold. Trading-in a used vehicle takes about 30 minutes, on your schedule.
Convenience – Private sales means dealing with the public. There will be strangers calling, e-mailing, visiting, and driving your car. You will have to keep the car clean, an work around their schedule. Assume it will take at least two weeks to sell your used car privately.
Condition – A dealer does not care about dents, dings, rips, or tears in the upholstery. If your car has seen better days, or it is not in a “saleable” condition, it is often time to trade-in.
The Bottom Line
While there is nothing outwardly bad about trading-in a vehicle, it does not pay nearly as well as a private party sale. There are those who point that the hassle of private party sales is not worth the extra money (often with a good foundation to their argument). Others argue that the monetary difference in question could be thousands of dollars…
Trade-in, or not. It all comes down to convenience, or cash.
Dealerships will use several different third-party guides, auction prices, and current market prices (they often call other dealers for the “going rate” on trade-ins) to establish a trade-in value. They will always error on the conservative side, to ensure they are not buying a car for an amount of money that they cannot quickly recover in a sale or auction.
The trade-in value of your used car will be lower than you expect. It some cases, it will be several thousands less than what you can sell it for yourself. This means if you do your homework, and you think your Toyota Camry is worth $13,000 used, the dealer will most likely offer you $10,000. Be prepared for this.
Trade-in for Top Dollar
While we have established you will not get retail pricing on a trade-in, there are ways to increase the trade-in amount (or “trade-in allowance”) you do get from the dealer.
Understand that the dealer will accept nearly any car on trade. Even if it needs to be towed in on flatbed, the dealer can find someone (a parts dismantler maybe?) to buy it for $250. (Keep in mind, if that is the case the dealer will be offering you $100 for the trade!). The object is to maximize the amount you get from the dealer.
The key to maximizing value is presentation. Clean the car with soap and water, and do not forget to wash the windows, wheels, and tires. Remove all of the personal belongings, bumper and window stickers, and trash from the interior. Clean the seats and carpets. Two hours worth of work just earned you at least $500 more in trade-in value.
Negotiate the Trade Last
Trade-ins can muddy the deal. In simple terms, you do not want to find yourself in a position of negotiating the price on a new car, and simultaneously negotiating the trade-in value. Eventually, a transaction like this ends up “combined” by the dealer into a single-figure negotiation. At that point, it is nearly impossible to determine the actual discount on the new car, and the trade-in value.
Discuss the sales price of the vehicle. Then, discuss the trade-in.
A Few Good Reasons to Trade-in Your Car
As we have established, trading-in a used vehicle is rarely done for financial advantages. However, there are several other advantages to a trade-in. This is what makes them so popular.
Time - Selling a used car privately can take weeks, or months. In fact, you do not know you have sold it until just minutes before it is sold. Trading-in a used vehicle takes about 30 minutes, on your schedule.
Convenience – Private sales means dealing with the public. There will be strangers calling, e-mailing, visiting, and driving your car. You will have to keep the car clean, an work around their schedule. Assume it will take at least two weeks to sell your used car privately.
Condition – A dealer does not care about dents, dings, rips, or tears in the upholstery. If your car has seen better days, or it is not in a “saleable” condition, it is often time to trade-in.
The Bottom Line
While there is nothing outwardly bad about trading-in a vehicle, it does not pay nearly as well as a private party sale. There are those who point that the hassle of private party sales is not worth the extra money (often with a good foundation to their argument). Others argue that the monetary difference in question could be thousands of dollars…
Trade-in, or not. It all comes down to convenience, or cash.
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