How Does Trading In a Car Work? What You Need to Know First

Steps to trade in a car

1. Find out what your trade-in is worth

Dealers use a variety of different references to determine what your used vehicle is worth. They can use the Black Book or Blue Book to find wholesale values. To get a good idea of what they might offer you, it's best to use an industry guide like Kelley Blue Book (KBB) to find out what your trade-in is worth. You'll need to know the vehicle make, model, mileage and condition. KBB says that about 54% of trade-in vehicles qualify as "good condition." Here are the four most popular industry guides for vehicle appraisal. The first three are free for the public to use online. Black Book is an industry guide that dealers can access for a fee.

Kelley Blue Book
National Automobile Dealers Association Guide 

Black Book

"When you're trading in a car, the dealership that [you] trade to will not be offering any more than the rough- to

average-wholesale price for the vehicle," says Steve Lang, a longtime auto auctioneer and car dealer out of Atlanta who co-developed the Long-Term Quality Index. Expect the dealer to offer a low value, and aim to get at least trade-in value for your car. The only common reasons you wouldn't be able to get trade-in value are if your car was in a major accident or if it has a salvage title.

What's my truck worth?

If you're wondering how much your truck is worth and you have a commercial vehicle, you could:

Buy a Price Digests report. Formerly known as the Truck Blue Book, it allows you to find out what a truck is worth by searching its vehicle identification number (VIN) or by searching the year, make and model. Unlike passenger vehicle appraisals, though, the Price Digests report isn't free. It costs $29.95 for one report. If you're in the business and frequently need truck appraisal reports, subscriptions start at $419.95 for truck valuations and go up to $999.99 if you also want to value trailers, RVs, powersport vehicles and more.

See what similar vehicles are priced at. Look at dealers' online inventory and at ads in industry papers to see the asking price for vehicles similar to yours so you can get an idea of your truck's retail value.

2. Find out how much you owe on your car

If you have a free and clear title with no lien on it, you're in business. If you still owe money on your trade-in, find out how much. You could still sell or trade-in a car with a loan. Contact your lender and ask what the payoff is on your auto loan. Compare what you owe on it to how much it's worth as a trade-in.

If your car is worth more than what you owe, then you have positive equity and can use the difference as a down payment on your new car, which could lower your monthly payments. For example, if you owe $10,000 on a car that's worth $15,000, you would have a $5,000 credit toward the purchase of your new car.

If your car is worth less than what you owe, don't despair, you could still trade-in your car, but you'll need to cover the difference with a down payment or roll the difference into your new car loan. If you add it to your new car loan, know that your payment and interest can increase. For example, if you owe $25,000 on your car and it's worth $20,000, then you could roll $5,000 into your new car loan. Here's more on how to get out of an upside-down car loan.

3. Shop around for trade-in quotes

Be sure to get all offers in writing. Here are some places you could go:

A different brand dealership. Take your car to a dealer that does not sell your car's brand. An example would be taking your Ford to a Nissan dealer because a non-Ford dealer may offer you more. The reasons behind this are that there are fewer Fords with which to compete and "If the car you are driving was a popular rental, lease or fleet model, they also transact at lower prices," says Matt DeLorenzo, managing editor for Kelley Blue Book. If you go to a dealer of the same brand, you could be "competing against those depressed prices with your privately owned vehicle."

A used-car-only dealership. Places like CarMax advertise fast, free quotes on trade-ins, so stopping by maybe a pretty painless way to get a written trade-in offer.

Online services. Some sites offer to buy your trade-in online. Whether you trade-in your car for a new one or sell it using an online site, an offer from an online service might be useful. KBB Instant Cash Offer is one example of a site you could use.

4. Gather documents

To officially trade in the car, you'll need the following documents.

  • Car title. If you own the car, bring the title. This proves that you legally own the car and that you are authorized to transfer ownership. If you lost the title, don't sweat too much. Dealerships usually keep a form on hand that you can sign requesting a lost title replacement. But you still need to prove ownership, which you could do with your car registration.
  • Car registration. Whether you paid off the car or not, the registration could serve as proof of ownership.
  • Loan information. If you're still paying off the car, you should bring your loan information with you, including the lender, the account number, and the amount you have left to pay off the loan.
  • Maintenance records. Bringing these could help prove that you've taken care of the car and that it deserves a higher price for being in a good, if not prime, working condition.

5. Negotiate

"Come into the dealership with a good idea of what your vehicle is worth and what you'd be willing to settle for," says DeLorenzo. Dealers will often make a low offer, expecting you to negotiate up. But you shouldn't take less for your trade-in than what an industry guide says it's worth.

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