It remains a seller’s market for used cars. The inventory of pre-owned vehicles is still limited, motivating dealerships to pay competitive prices for trade-ins.
If these market dynamics have you considering a trade-in for a new vehicle, don’t rush to the dealership and risk missing a great deal. By following these steps, you can enhance your car’s trade-in value and secure the best possible offer.
1. Do Your Homework
Understanding your car’s value is critical if you plan to trade it in. Start by researching its current trade-in value using resources like Kelley Blue Book and Edmunds. However, be honest with yourself about your car’s condition and any necessary repairs.
Keep in mind that you’re unlikely to receive the top resale value unless your car is in exceptional condition. Additionally, trade-in values are generally lower than selling privately because dealerships need a margin for profit.
“Many people think they are going to get the top value, but dealers taking in the trade need a margin of profit and will offer you less than the trade-in price listed on these sites,” says auto expert Lauren Fix.
2. Address Known Mechanical Problems
Your car’s mechanical and physical condition significantly impacts its trade-in value. Resolving minor issues that are inexpensive to fix can make a big difference.
Small cosmetic fixes, such as repairing dents, scratches, or non-functioning lights, are often worth the investment. Research which repairs will provide the best return on value relative to their cost.
Additionally, check the National Highway Traffic Safety Administration database for recalls affecting your car. Repairs for recalled parts are free and can enhance your vehicle’s appeal.
Be sure to keep receipts for all maintenance and repairs, including historical ones. Presenting these records to a dealer demonstrates that you’ve taken good care of the car. Obtaining a car history report for your vehicle is also a good idea.
3. Ensure Your Car Looks Its Best
Lauren Fix emphasizes the importance of appearance, stating that a clean and well-maintained vehicle is more likely to fetch the highest trade-in value.
“Clean the vehicle inside and out,” she advises. “Detailing the car is like staging a home for resale.”
First impressions matter, and a polished vehicle can increase its appeal to potential buyers or dealers.
4. Shop Around for Trade-In Quotes
Zach Shefska, president and CEO of CarEdge, advises car owners to shop around for trade-in offers.
“Get as many competitive quotes for your trade-in as possible before engaging with the dealer,” he recommends.
Gather quotes from Carvana, CarMax, and other major used car buyers before approaching the dealer you plan to purchase from. Use these offers as a reference to gauge your car’s baseline trade-in value.
5. Separate Trade-In and Purchase Negotiations
When negotiating, keep your trade-in value and new car purchase price separate. This ensures you maximize your trade-in offer while securing the best deal on your next vehicle.
Shefska cautions against dealerships that combine these transactions into a single deal. “They do this because there are more opportunities for a dealer to generate profits when working on two transactions at once,” he says.
Always request a written trade-in offer to protect yourself from changes or reversals. A formal document is especially important if you plan to leave the dealership, compare other offers, and return later.
6. Time Your Trade-In Strategically
Timing can play a big role in the value of your trade-in. The best time to trade depends on your car’s year, make, model, and even seasonal factors.
Matthew Kircher, financial advisor and president of Fairpoint Wealth Management, strategically timed his trade-in. In January 2021, he traded in his Ford Escape and purchased a 2021 Toyota 4Runner.
Knowing that all-wheel-drive SUVs are in demand during winter and before the spring college semester, he waited for the perfect moment.
“We waited until the perfect time to trade in our used vehicle to boost its value,” Kircher explains. “We also timed it perfectly, with the best offers for new vehicles coinciding at the same time.”
The first two quarters of the year are often favorable for trade-ins, as buyer demand tends to be higher. During this time, dealerships may offer better trade-in prices to meet demand.
Trading in a Car with an Outstanding Loan
If you’re still paying off your car, trading it in may not be the best option, especially if you owe more than it’s worth.
Selling the car privately might yield a higher price, or you may need to wait before purchasing another vehicle. If you proceed with a trade-in, any negative equity will likely roll into your next car loan.
The Federal Trade Commission (FTC) warns against dealerships that promise to “pay off your loan no matter how much you owe.” While they might pay off your existing loan, the negative equity will still be factored into your new car loan.
“Dealers may include the negative equity in consumers’ new car loan,” the FTC writes. “That would increase their monthly payments by adding principal and interest.”
The Bottom Line
Maximizing your trade-in value can help lower the price and monthly payments on your next vehicle. By conducting research, making cost-effective repairs, cleaning your car thoroughly, and shopping for multiple quotes, you can secure the best deal.
When purchasing a new car, compare auto loan options carefully. Dealership financing might not always be the best choice.
You could get preapproved for a loan online with more favorable terms, using the offer as leverage when negotiating the final deal.