How Do You Trade in a Car?

Unless you plan to own a greater number of vehicles, you’ll typically find that purchasing a new car also creates the need to get rid of your old one. When you choose to trade in your vehicle, you can quickly secure funds to apply to your next purchase. If you’re still paying off your vehicle, a trade-in can help you get the necessary assistance paying off your outstanding loan and finding funds for a new (or new to you) vehicle.

Understand Your Current Loan

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Before trading in your vehicle, it’s important to know what – if anything – is owed on it. If you’ve paid off your current vehicle, you can skip this step.

If you have an outstanding loan on your potential trade-in, contact your lender to find out exactly what it costs to pay off that loan. The payoff amount is typically more than the outstanding balance on your car, as it includes interest and additional fees.

You must pay off your existing loan in order to trade in your vehicle. The dealership that accepts your vehicle as a trade-in will help you handle this transaction. They will typically take care of the title transfer and other paperwork associated with the sale.

If your vehicle is worth more than the outstanding sum on your loan, the trade-in value will cover all the costs associated with paying off that loan. If your vehicle is worth less than what you owe on the loan, you’re considered “upside down.”

You will have to find a way to pay off the remaining balance either before you trade in the vehicle or as part of the trade-in. It’s best to pay your loan off with cash if you can. This way, you can settle the loan before you begin negotiating your trade-in.

If you can’t afford to pay off the loan, most dealerships will let you roll the outstanding balance into your new auto loan if you’re purchasing a vehicle from them. However, this may cause you to pay a higher interest rate on the new loan.

Determine the Value of Your Trade-In

You can negotiate the price you receive for your trade-in just as you can negotiate the cost of your new vehicle. Make sure you’re well-informed so you can get the highest possible sum when trading in your old vehicle.

Check the value of your vehicle using a car appraisal tool such as the Kelley Blue Book. These online tools collect basic information about your vehicle and offer an estimate of its worth. Be honest about the condition of the car and err on the lower side if you’re in doubt. This way, you will be pleasantly surprised by other appraisals and not disappointed at the dealership.

Have your trade-in appraised at a few different dealerships. Call ahead and make an appointment for your appraisal to keep your wait time to a minimum. Most dealerships have just one person handling this job.

You will often find that dealerships that don’t carry new cars in your make offer the best price for it. A Toyota dealership already has access to lots of Toyota vehicles, but it will typically sell other makes on its used lot. This makes it a prime choice if you’re looking to trade in a Honda, because your vehicle will add diversification to the lot.

Compare prices, and let the dealer know if Kelley Blue Book assessed a higher value for the vehicle. You may find that the dealer will increase their offer if you have proof that the vehicle is worth more.

You can also use competing offers to help you get the best trade-in price. If you see your dream vehicle at a particular dealership but their trade-in offer is low, let them know that you found a better deal up the road and you may find that they will match it.

Gather the Proper Documents

Keep written proof of all your trade-in offers as well as your Kelley Blue Book appraisal. It’s important to have these documents on hand as you’re negotiating a price for your trade in.

If you have an outstanding loan on your trade-in, you will also need:

• The payoff amount for your loan.
• The account number for your loan.
• Contact information for your lender.

For all types of trade-ins, you should have:

• Your driver’s license.
• Vehicle registration.
• Vehicle title.
• Proof of insurance.
• All keys and remotes for the vehicle.

Negotiate For the Best Deal

Once you have a few appraisals at hand, you can begin negotiating for the best offer. Keep in mind that you don’t have to trade in your vehicle at the same dealership where you’re purchasing your next one. However, this will simplify things if you can negotiate a great offer for both transactions in one place. When you purchase a vehicle from the same dealership that’s taking your trade-in and use their financing, you can immediately apply the value of the trade-in to the down payment for your next car.

When using the dealership’s financing, it’s important to understand the terms of the loan and make sure you’re getting a good deal. This is another area where it’s helpful to do some comparison shopping. If another lender offers you a substantially better auto loan, you may find that it’s worth the added complexities to complete your trade-in with the dealership, accept the cash from that transaction, and start a new transaction for your vehicle purchase.

Take the time to speak to different lenders and educate yourself on your options. It’s always best to get the lowest interest rate possible for your new vehicle. When you’re handling a large purchase, even a low interest rate can equate to a large sum of money.

While your trade-in may provide you with some cash to apply to a down payment on your next vehicle, it’s best if you can add to the down payment yourself as well. The more you put down upfront, the less you’ll pay in interest over time.

Trading in your vehicle is a helpful option when you want to apply its value to the purchase of your next car. If you’re ready to start exploring your options for a trade-in, visit Hiley Mazda of Forth Worth today to find your next vehicle.