If you want to get rid of your old car then trading it in might be your best option, at least it’s one of the easier options.


Usually when you trade in your car a dealer buys your old car from you and you buy a new one from them. If you’re trading in your auto there are steps you can take to help make sure you get the best offer.


Every dollar counts when you’re trying to buy a new car. The dealers will try to lowball you every chance they can so they make a profit. It’s important to consider the trade-in process, pros and cons of trading a car in, and even understanding how to trade-in a car with bad credit if you don’t have the best credit situation.

Trade-In Process

The easiest thing to do is to take your car to the dealer and have them look over your car and give you an estimate. This isn’t the best method and often leaves the consumer unaware if the dealer is not giving them a good offer.


We suggest taking the time to do your homework and make sure you know what your car is worth and the current market value.


The steps to take for a trade-in:

  1. Research the value of your trade-in auto.
  2. Review what you currently owe (if you do).
  3. Get an estimate from several dealers.
  4. Negotiate your trade-in price.
  5. Close the deal.

The biggest mistake you can make is not understanding what your car might be worth. A website like KBB or TrueCar can give you a good market estimate. If you’re going to use these sites you should be honest with the state of your car and all the features that came with it, that’s the only way you’ll get a true range.


If you owe any money on the car you’re going to want to factor that into the overall price. A lot of people don’t realize that unless you put a substantial amount down as a down payment, you’re most likely underwater on your loan. A good down payment for a car to avoid being underwater is around 20%.


You should never get an estimate from just one dealer. You should always get one from at least 2 but we suggest more, if you can. Not only will this give you an idea of what the dealers are offering for your vehicle but it also gives you some leverage. For example, if there is a dealership that you really want to go to but they gave you the lowest offer you can mention to them that you’ve already gotten a much higher offer at another dealer and you’ll just go there. In many cases they will try to match the other dealer. Be careful though, they like to slip in other fees and services to make up that lost profit.

Pros and Cons of Trading in Your Vehicle

Trading in your auto comes with some benefits and drawbacks. A lot of these depend on your financial situation but you may decide that selling your car on your own makes the most sense, especially if the dealers are not getting anywhere close to where you would like it or the market value.

Pros of Trading in a Car

  • In many states you only pay taxes on the difference in the price of the new car and used car so you’ll end up paying less taxes.
  • You don’t have to deal with the hassle and long time period of trying to sell your own car.
  • It’s usually a quick and easy process at a dealership once you get rolling.
  • You complete the transaction all at the same time with no hassle of return visits.
  • The dealer takes care of all of the paperwork.

Cons of Trading in a Car

  • You’ll more than likely get less than you desired for your car.
  • If you owe more than the car is worth on your loan (underwater) many dealers will roll that negative equity into the new loan and you’ll be paying for it either way.

Using a Trade-In on a Lease

If you’re using your trade-in car as a down payment on lease you’ll be happy to hear that you can do that. A lot of people don’t know that if you’ve paid more on your lease than expected (usually happens when you trade in your car as a down payment) then you’ll get a nice fat check at the end of the lease paying you the difference. Many use this as their down payment for their next lease or new car finance.


If you’re not sure how leasing works, take the time now to learn how to get a lease.


A car buyer pays the entire negotiated price of a car. They usually will get a loan from a lender to finance what they owe on the vehicle. A lease customer only pays for the depreciation that occurs during the term of the contract plus interest and fees. That amount is then put into a down payment and a series of equal monthly payments. As soon as the lease ends the vehicle is returned to the place where the contract originated.

What to Do Before Trading In

Most of the preparation for trading in a car is the same as if you were to sell it privately. The only upside is that you typically do not have to get the car repaired first as the dealers buy the car as-is and they will do the work to refurbish it.


Here are a few tips to make sure your car is ready for trade-in:


Gather all of your paperwork. It’s worth it if you can prove that you’ve kept up with maintenance. You’ll want to have your service records all in one place and copies of the receipts to prove you’ve taken care of your car. It’s a good idea to provide receipts on things like tires and brakes to show you’ve replaced them recently. The less a dealer has to do to your car means the more they will give you as an offer.


Clean it. There is no golden rule on how clean your car should be as the dealer will more than likely clean it and sanitize it. The offer they gave you already includes the cost of refurbishment so you can drop off the car unclean and unwashed. It’s respectful to clean up your garbage and get all of your personal items out and give it a quick wash.


Fix the easy stuff. If you’re selling your car privately then you’re going to want to fix as much as you can. This is similar to if you’re trading in your car. You’ll want to fix whatever you can before you get a quote from a dealer. In many cases the dealer will just lower the offer price in favor of them having to fix the car. The dealers often get a much cheaper cost for repair than a consumer would. For example, it may cost you $250 to repair your windshield but the dealer can get away with a cost of $150. In this case it may be in your best interest to not fix the windshield and just take the $150 cut in the offer.


Pay all your tickets. If you have any traffic tickets or parking tickets it can hold up a sale. A lot of people don’t realize that if you have outstanding tickets it can hold up any title transfer until those tickets are taken care of.

Alternatives to Trading In Your Car

Trading in your car is an easy way to get rid of the old clunker you’re no longer wanting. But it’s not the only way to unload your car. If a dealership isn’t giving you what you want for your car it’s best to walk away and try out other alternatives to trading in your vehicle.


Find other dealers. This one may be kind of hypocritical but if a dealer isn’t giving you what you want then find a dealer that will. Each dealer will give you a different deal for your car and some will always give more than others. For example, a dealer that sells your specific car will more than likely give you a higher quote than a dealer that doesn’t. If you have an interesting car you should look at being creative. For example if you have a truck you should look for a dealer that’s not in a major city and that is in a more rural town.


Used car superstores. These are a pretty new thing but they have a very streamlined process for buying used cars. You might not get as much as you would if you sold your car privately but the upside is that these are super quick and easy.


Private sale. This is probably the hardest thing to do but will usually get you the highest price. These sales require a lot more time and effort than other methods. You’ll have to list your car in various marketplaces and handle all the paperwork the dealer normally would for you.


Instant cash offer. Another relatively new trade-in method is to get an instant cash offer from a dealer. You’ll enter in your car’s detailed information and you’ll usually get an offer from an interested dealer.


Donate your car. If you don’t owe on the car and you’re really not going to get that much from the dealer it may be smart to donate the car to charity. You can get a small tax dedication but be aware there is a process in donating your car to charity and the IRS tracks everything. You can find more information from the IRS here.