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How to trade in your car
Follow these 6 steps to get the best deal out there.
Trading in your car involves bringing your current vehicle to a dealership for a new one. Instead of paying for the new car in full, the dealer subtracts the trade-in value from the price tag. Like with most aspects of car buying, there’s some wiggle room to maximize your trade-in value.
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Technically, all you need to do to trade in your car is bring it to a dealership, pick a new car and sign the paperwork. But you probably won’t get the best trade-in value. These steps can help ensure you don’t go into a trade-in blind and get a raw deal.
Step 1: Get an estimate of your car’s value
Start by getting an estimate of your car’s trade-in value online so you have a number in your head. Websites like Canadian Black Book and Auto Trader Canada can help you get a solid picture of how much you should be able to get for your used car.
Be prepared to have the following information on hand to get an accurate estimate, including:
Model, model, trim
Your postal code
If your car’s been damaged in any way, you might want to take it to a mechanic to get it appraised, since its value might have been affected.
Step 2: Calculate your equity
Already own your car outright? You can skip this step. If you’re still paying off your loan, find out if you have positive or negative equity by subtracting your loan balance from the trade-in value.
If you get a positive number, that means you have positive equity and might be able to get a better deal when you trade it in.
Step 3: Gather your documents
Dealerships typically ask to see several documents when giving you a quote, including:
Loan payoff amount
Loan account number
You also might need to bring all of the keys you have for the vehicle you want to trade in.
Step 4: Get quotes from a few dealerships
Do some research on dealerships in your area and schedule an appointment. Some dealerships might be able to give you a quote over the phone or by email, while others might insist you bring in the car.
When you bring in your car, a used car manager will examine the vehicle before coming up with a quote. Even if a deal sounds good, don’t sign any paperwork until you’ve heard from other dealerships. Consider starting with a dealership that allows you to hold on to your offer while you shop around.
Step 5: Negotiate with your chosen dealership
Use the different quotes you received to negotiate a better deal at your chosen dealership. But don’t ignore the cost of your new car.
Research the value of each car you’re considering buying with your trade-in and use that to negotiate down the cost. Check out these tips for buying a new car which can help you make a smarter decision. If you think a dealership isn’t giving you a fair price on a used car, consider having the vehicle appraised by an independent third party.
Step 6: Close on your trade-in
How this step works can differ depending on whether you own the car or still owe money on it. If you own the car, trading it in is relatively straightforward. The dealer subtracts your current car’s value from the new car and you pay the difference. Or if you’re buying a car that costs less than the trade-in price, the dealer writes you a check.
What happens when you have a car loan depends on whether you have positive or negative equity. If your car’s trade-in value is worth more than your car loan balance, the dealer deducts the difference from the price of the new car.
If you have negative equity, you’re responsible for covering the difference between your loan balance and the trade-in price. You might be able to roll the negative equity into a new car loan, but that adds to the risk of going underwater on your next car loan. Pay it off in cash if possible to avoid another upside-down car loan.
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Three tips for negotiating a good trade-in deal
Ready to trade in your car for a new one? Follow these pointers to get the best deal out there:
Brush up on your sales tactics. Go into the dealership with an idea of what to expect so you don’t walk away convinced your car is worth less than it actually is.
Negotiate the new car price first. Focusing on the price of the new car you want to buy can help you hone in on the difficult part before tackling the trade-in deal.
Time it right. Dealers are often more flexible at the end of the month or year, when they’re trying to move cars off the lot.
Should I trade in my car?
Trading in your car takes a lot less time than selling it yourself. You won’t have to take it in for inspections, advertise it or make time to have prospective buyers test-drive it.
You also might be able to avoid paying sales tax on your new car, depending on where you live. Or you might only have to pay sales tax on the difference between your new car’s value and your old one’s.
Should I sell it to a private buyer instead?
If you want to get the most money for your vehicle, selling it to a private buyer might be a better choice. Dealers tend to buy trade-in cars at wholesale value, which is less than the sticker price you’d get from a private-party purchase. If you’re not a skilled negotiator, your dealership could even pay you less than that wholesale price.
Taking the right steps when you trade in your car can help ensure you get a fair deal. But if you’re looking to maximize profits, consider selling it privately instead.
You can, though you might not have as many financing options if you need to take out a new car loan to cover the difference. Otherwise, the dealership likely won’t run your credit since you won’t need to borrow to pay for your new car.
You can — and you have a few options. You can sell your lease to the dealership in exchange for a new lease. Or you can sell your lease to a dealership and purchase a new vehicle. If the buy-out cost of your lease is worth less than the new car, you might have to cover the difference.
You can, but it might not be the best idea if you have a new car — you likely owe more money on the car than it’s worth since cars depreciate at a faster rate in the beginning. Research your potential trade-in value before you make a decision.
Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 950 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
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