Buying a new car can be a lot of fun, especially when you pull into your driveway with a shiny new vehicle and show it off to your family and friends. But if you're trading in your old car, the process can be a pain. Conventional wisdom tells us that we can get more money for our used car by selling it to a private person. But the truth is, you still have to negotiate the price with a buyer and often take less than you'd like. Add in the cost of advertising your car, and the fact that you'll have to pay tax on the entire amount you receive, and that extra profit could be a wash.
Tips for Trading in a Car
What are the Advantages of Selling to a Dealership?
Trading your car to a dealership has its advantages including the fact that you'll pay less in taxes by subtracting what you get for the trade-in from the price of your new car. Also, keep in mind that the dealership handles everything. You'll get an accurate appraisal of what your trade-in is worth, and you may be surprised at what your used car will fetch in today's market.
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Once you approve the appraisal, you simply drop off your old car with its title and registration and the dealer handles all the paperwork to transfer the title of your trade-in as well as handling the deal on your new car, getting it licensed and ready for the road.
Top Trade In Tips
With all that in mind, here are some trustworthy tips for trading in your car.
Much like staging a house for sale, it is important that your trade-in car "presents" well". A good wash and wax job can make your trade-in look its best and show a prospective buyer that you take proper care of the car. It shows that you care. Remove all personal belongings from the vehicle, vacuum it out and detail the interior. Clean the engine bay too. Some people even go to the expense of having the car detailed so it shines like new.
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As part of making the car look its best, have any small dents, dings or paint chips repaired within reason. However, if you are selling to a dealer and have a trade-in that has over 50,000 miles on the odometer, don't bother, because the dealer will just turn the car around by selling it at auction.
The dealer will want to know about the vehicle's service history. Keep all receipts for any repairs and oil changes to show that the vehicle has always been properly maintained. Using the same dealership for all your oil changes and repairs and then trading in the car at that dealership is a great idea. The dealership already knows your car and has all the service records in their computer.
Kelley Blue Book is a great online source to find out what your vehicle is worth. Simply go to kbb.com, click on Car Values, and enter your trade-in's 17-digit VIN number. KBB will tell you what your trade-in is worth to a dealer and even give you an official offer to buy your car from participating dealers. You can also get an offer to buy or trade your car at driveway.com and our trusted offer is good for seven days.
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Armed with knowledge about what you can expect to get for your trade-in, look for dealerships that are offering special promotions for trade-ins. Depending on a car lot's inventory, your car may be something they are looking for. Some makes and models of trade-ins are easier to move. It's a good idea to get quotes from competing dealerships to get the most for your trade-in.
Why is it Best to Trade with a Dealership?
Unlike going through the hassles of staging your car, taking photos, writing an ad, and getting your car on social media, newspaper classifieds, and car selling websites, trading to a dealership is a quick and easy experience. The dealer buys and sells cars every day. They will appraise your trade-in, and work with you on your trade value so you can use your old car as part of your down payment for the new car you want. The dealership handles every aspect of the transaction from start to finish.
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Negotiating the Deal
One of the mistakes that people make when trading in a car for a new car is that they focus on the monthly payment of the auto loan. You want to negotiate the value of your trade-in first so you know exactly what the dealer will pay in trade. Then work on negotiating the price of the new vehicle separately. Finally, talk about loan terms, your down payment, and how to create a payment plan that works for you. You want a monthly payment that you can live with.
What happens if you still owe money on your Trade-in?
You don't have to feel that you are stuck with your old car if you are still paying off the current loan. You can trade in a car that you still owe money on. It all comes down to positive versus negative equity. Positive equity is when your trade-in is worth more than what you still owe on it. Your positive equity can be applied to your down payment for that new car, reducing what you finance.
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Negative equity is when your current car is worth less than what you still owe on your car loan. In such a case, you are responsible for paying off your old car loan and often the dealer can help you to roll the payoff amount into your new car loan. Negative equity is also known as being "upside down" on your car loan.
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How does a Trade-in reduce Sales Tax?
Keep in mind that most states have what is known as a trade-in sales tax credit. This is when you are able to deduct the amount of your trade-in from the sales price of your new car before tax. In other words, if you buy a new vehicle for $35,000 and the dealer gives you $10,000 on your trade-in, you only pay tax on $25,000.
Trade-in Summary
Looking back at what we've learned here, before you trade in your car, here are the tips that will help you get the most out of your trade-in's value. Improve your car's curb appeal by cleaning it out, give it a vacuum, a wash and a wax so it shines like new. Be up front about your car's condition including any known mechanical problems or any noticeable dents and dings. Keep service records to show that you have always taken proper care of your vehicle's maintenance.
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Use online appraisal tools to get a good idea of what your vehicle is worth as a trade-in. At Lithia Motors we're happy to do an in-person appraisal. We'll look at your trade-in's condition, mileage, and accident history to make you an offer you can trust.
Let Lithia Help
Remember to treat the trade-in process as a separate transaction and get the offer locked in before you begin negotiations on the new car you are buying. Once you know your trade-in offer and the agreed upon price of the new car, you are ready to discuss and adjust your loan terms including your down payment, and our financing experts will help you calculate a monthly payment that works for you.
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Lithia Motors has over 75 years of experience in producing personal transportation solutions for our valued customers that will exceed all your new car dreams.
