What Determines My Used Car Trade-In Value?

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Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - May 28, 2020

If you’re considering trading in your used car to help lower how much you finance on your next auto loan, you’re probably wondering how its value is determined. We cover how dealers and valuation sites estimate trade-in values, and the steps you should take when trading in your used vehicle.

How Used Car Values Are Determined

A used car trade-in can help meet the down payment requirement of a lender, lower the total amount you’d need to finance, lower your monthly payment, and lower the amount you pay in interest charges – basically, it saves you money! Trade-ins are common, and a great way to help upgrade your ride.

Determining a used vehicle’s actual cash value (ACV) isn’t exactly a perfect science, but there are a lot of factors that valuation sites and dealerships use to get as close as possible. When you use a trade-in for your next car, the dealer is the one who gives the vehicle’s ACV.

There are a number of factors that determine the value of your car, a few that you likely already know, such as:

  • Year
  • Mileage
  • Make and model
  • Trim level
  • Vehicle's region
  • Overall condition
  • Optional equipment (leather seats, sunroof, etc.)
  • Desirability and overall reliability

All of these factors come together to determine the trade-in value of your car. Since used vehicles have typically been on the road for a while, and every year they depreciate more, guessing what your car is worth can be tough.

Estimating Your Car’s Trade-In Value

Luckily, there are ways to estimate your car’s trade-in value before you head to a dealership, so you can get an idea of what you may be offered.

There are quite a few auto valuation sites, but the two commonly used ones are Kelley Blue Book and NADAguides. They’re easy to use if you know the year, make and model, and mileage of your vehicle. They also give you a retail estimated value and estimated trade-in value, based on the information you enter.

Be sure to enter in your car’s information as correctly and honestly as possible to get the most accurate estimate. When you take your vehicle to the dealer to have it appraised, it's likely to be thoroughly inspected and probably driven. If the information you entered on a valuation site isn't exactly true, you're going to see a bigger difference between that estimate and what a dealership is willing to offer you.

Once you have an estimated value, your next step is determining if that value will help you with your next car purchase.

Trade-Ins as Down Payments

When you’re trading in a vehicle, it’s imperative to know if your car has equity. The equity in your vehicle is what’s used to knock down the price of your next car. If you own your vehicle outright, the entire trade-in value can be used as a down payment if the dealer accepts it.

If you’re still financing your current car, finding out if you have equity is rather painless. Simply contact your lender, ask for a 10-day payoff, and compare that to your vehicle’s estimated value. If you owe less on the car than its estimated value, you have equity! This difference can be put toward your next vehicle’s down payment.

If you find out that you owe more on the car than it’s worth, things get tricky. This means you’re likely in a negative equity position, also called being upside down on your auto loan. However, this can easily be fixed with time, continuing to make payments, and maintaining your vehicle.

Being in a negative equity position isn’t the best, but it's rather common for financed cars with loans that are less than three years old. Additionally, if you have a high interest rate, it can be harder to chip away at negative equity. But typically, it tends to lessen as long as you keep making payments and pay down your loan.

Next Step When Trading In a Car

Now that you know the factors that play into your car’s trade-in value, how to estimate it, and how to determine if that equity can be put toward your next vehicle, finding a dealership is the next step.

If you’re struggling with credit issues, a down payment is likely to be required by most lenders. Thankfully, a down payment doesn’t have to be cash – it can be a trade-in. But if your credit score isn’t the best, finding a lender that can work with you can be a hassle. We want to help with that!

Here at CarsDirect, we connect bad credit borrowers to dealers that have special finance departments that work with subprime lenders. Finding a subprime lender could prove difficult, but we can help with that.

To get matched to a dealership with bad credit lending options, simply fill out our free auto loan request form.

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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