It’s important to budget appropriately when looking for a new car. However, if you’re intending to trade in your current car, then the value of your old ride can directly impact just how much money you can spend on your next vehicle.
Can you comfortably spend, or afford to take out a loan on, $20,000? Well, if your current car’s worth $10,000 at trade-in, then that means you can afford to purchase a vehicle of up to approximately $30,000.
But what if your current vehicle only appraises at $5000? Now, you’re limited to new vehicles priced up to approximately $25,000. The amount of car that $30,000 nets is typically far greater than what $25,000 does.
The bottom line is that if you’re considering going the trade-in route, the first thing you need to do is figure out how much your car is worth. With that info in hand, you can pick a replacement that fits within your budget, as well as have an idea if a dealer is low-balling you on the appraisal.
Car and Driver calculates your car's value in three free and easy steps - using the same Black Book® data dealers use to appraise vehicles.
After you determine the value of your vehicle, it’s time to take it to the dealership and shop for a new car. The dealer will negotiate a price that includes your trade-in value. From there, you can determine if trading in your vehicle is the right choice. If you agree to the price, then the dealer deducts the value of your trade-in from the price of the vehicle you’re purchasing from them.
Trading in your vehicle is much simpler than trying to sell your car on your own. You can think of a dealership as a one-stop shop for buying and selling a car. You can drop off your old car and take home a new one on the same day, which takes the work out of selling or getting rid of a vehicle you don’t want anymore.
While trading in a car is a simple process, you still have a few things to consider before you follow through with it. Here’s how trading in a car works.
Before you can make a decision, you need to understand the process of trading in your previous car in exchange for a new vehicle. When you know what to expect, you can make the best financial decision for your family.
One of the biggest factors involved in your decision to trade in your car is its value. You want to know how much you can expect to get from the dealership, as well as what you should expect if you decide to sell the vehicle to a third party.
Car and Driver has an easy-to-use valuation tool that enables you to learn what a dealer will pay you for your car. These tools will also calculate your vehicle’s private-party value. This is the estimated price you could sell the car for on your own.
If you’ve paid off your car, you’ll easily be able to figure out its value. However, the trade-in value of your car will be lower if you have negative equity in the vehicle.
Next, gather the information the dealership will need about your car. This includes loan information, like your account number and payoff amount, vehicle registration, proof of insurance, and the amount you’d like to receive for your vehicle.
When you arrive at the dealership, you’ll first test-drive a new or used car and choose the one you’d like to buy. You’ll get information about how much the car costs and negotiate the price. Once you agree on a price, tell the dealer that you're interested in trading in your car. This allows you to negotiate a price without the dealer factoring in your trade-in ahead of time.
When you’re in the office with the dealer discussing trade-in value and the like, make sure you keep your own notes. Track the figures independently and do your own math. Understand exactly where each figure comes from to avoid surprises at the end of your transaction.
At some point, the dealership will assess your vehicle by conducting its own inspection. The inspection will also involve a test drive of your car to ensure that it runs well.
Once the value of your trade-in is factored in, you’ll finalize the deal by signing paperwork. Make sure to read everything carefully, looking for any add-ons or extra features you didn’t want to include in your agreement. You can then clean out your car, hand over the keys, and take home your new vehicle.
Extracted and lightly reformatted for readability. · Source: pt