Trading in a Car: How It Works

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - May 7, 2019

So, it's time for another car, but if your old vehicle isn't dead, destroyed, or dying, what do you do with a ride that reliably got you from point A to point B for so long? Typically, the answer is to trade it in. But how exactly does the trade-in process work? Let us enlighten you.

Trading in a Car You Own

When you own a car that still holds some value, it can be used toward the down payment on another vehicle. When you have a trade-in, you have the option to use all or part of its appraised value as a down payment, or to combine its value with cash.

Before you trade it in, you have the opportunity to get quotes from online retailers and multiple dealerships. Before heading to a dealer, you should always look your car up on trusted vehicle valuation sites such as Kelley Blue Book and NADAguides.

This way, you're armed with a ballpark figure and are knowledgeable enough not to take too little, nor expect too much, for your car. Keep in mind that what a dealership is willing to pay doesn't always line up with the estimated value of your vehicle.

When you're trading in a car, dealers typically appraise your vehicle and provide you with a quote that's good for around seven days, but this varies. Make sure you go to at least three dealerships for an appraisal, and make sure at least one sells the same brand that you’re driving. This way, you can shop for the best deal for your trade-in.

What if I Don't Own My Car?

If you don't own your vehicle because you still owe money on it, you can still trade it in. Trading in a car you owe money on works the same as trading in a vehicle you own, except before you get any of the money from the trade-in, your loan must be paid.

This works out better for you if the actual cash value of the car is more than the amount you owe on the loan. If you owe more than the vehicle is worth, the car has negative equity.

Also called being upside down, when there's negative equity involved in a trade-in, you generally have to make up the difference between what the dealer offers and the loan balance. In this case, you typically pay the lender in cash.

In certain situations, though, a lender may allow you to roll over the negative equity. Rolling over negative equity may seem like a great deal because you don't have to pay anything out of pocket You should know, however, that you're going to be paying more in interest expenses in the long run – you're still paying for the negative equity on your old loan in addition to the cost of your new loan.

A Few Tips to Keep in Mind

Now that you know what to expect from the trade-in process, let's look at a few tips to keep in mind:

  • If you're trading in your vehicle, but your new car isn't ready for pick up, don't forget to have someone follow you to the dealership so you can get home. Depending on the distance, a ride-sharing service or taxi can be costly. You can also check to see if a dealer offers a shuttle service as an alternative.
  • You can't trade in a vehicle you don't own or aren't financing. Remember, your name has to be on the title in order for a dealership to accept the trade-in. When you trade in a car you're financing, the dealer takes care of transferring the title.
  • Remember that the condition of your vehicle affects its value. Give the car a good scrubbing both inside and out, fix anything minor that isn't too expensive, and provide records of the maintenance and services done if you have them. All of these things can increase the value of the vehicle.
  • Don't forget the extra items that go with the car. All the extras that came with the vehicle should be with it when you trade it in, like extra sets of keys, cargo nets, floor mats, books and manuals, and any CDs or SD cards that may have come with the car's infotainment or navigation system.
  • Don't forget to clear your data! If you have a vehicle with Bluetooth, Android Auto, Apple CarPlay, or even a basic navigation system, clear your settings and information before trading it in. While a reset should be part of a dealership's protocol on such systems, you shouldn't leave it to chance. The last thing you want is the next owner of the car showing up at your door because that's where the navigation system thought was home.

Need to Find Your Next Vehicle?

If you're ready to trade in your vehicle but don't know where to go, look no further than CarsDirect. We can help get you connected to a dealer that can handle all kinds of credit situations.

Whether you have good credit, bad credit, or no credit, we work with dealerships that have the lenders you need. Fill out our fast, free, and easy auto loan request form, and we'll get to work finding a local dealer for you!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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