When buying a new or used car, many people will opt to trade in their old vehicle. This is an easy and convenient way to get some value for something you may have been planning to get rid of anyways. While trading in your car is a straightforward process, it’s still an important decision for you to make. In most cases, you won't maximize your value by trading in your old vehicle, but you’ll save a lot of hassle since you don’t need to worry about selling it on your own.
Besides the price, there are many do’s and don’ts when you’re considering trading in your vehicle:
Do check the value of your car
The first thing you should do before heading to a dealer is to check the value of your vehicle. Edmunds.com and kbb.com are the most popular sites to see what your car is worth. It’s also worth checking used auto websites such as Autotrader.ca, so you get a general idea of what your exact model is worth on the resale market. This information will be vital when deciding whether to trade in your car.
Don’t expect a full offer
Even if you know the value of your used vehicle, it’s unrealistic for you to assume that car dealerships will offer you that entire amount. Since the dealers are taking on the added work of selling your old vehicle, they’ll offer you less than if you had sold it on your own. That’s because dealers need to factor in labour costs and the vehicle taking up a spot on their lot. Generally speaking, you can expect dealers only to offer you 25% - 60% of what the true value is.
Do get your car trade-in ready
When shopping for a new or used vehicle, dealers will ask you if you’re doing a trade-in. If you say yes, they’ll quickly do a walkaround of your car, check the mileage, and see if the auto has any recorded accidents. It’s unlikely they’ll do a deep dive into your vehicle to see the value. To ensure you’re getting the best offer possible, you’ll want to increase your car’s value as best you can. Give it a wash, wax, and thorough cleaning before you arrive on the lot. Basically, you want the inside and outsides of your car to be as nice as possible, since first impressions matter here.
Do pay off your vehicle before trading it in
Cars are expensive, and they depreciate significantly as soon as you drive off the lot. If you have a financed vehicle, it’s a good idea to pay off your entire loan before shopping for a new car. Even though most car dealerships will allow you to roll any outstanding balance you have on your current vehicle to your new one, that will only increase your debt load. Keeping your debt load low can help you manage your budget and daily expenses.
Don’t be afraid to shop around
Trade-in offers can vary depending on the dealership and its inventory. One dealer may feel more confident in selling your car over another, so they may offer you more. Also, don’t be afraid to take your car to a dealer that doesn’t sell your current vehicle model. For example, a Subaru dealer may still be interested in your old Honda if they know it’s a popular model or there’s a lack of Hondas in the area. Also, some dealers only sell used vehicles, so they may offer you a higher trade-in value.
Do get your offer in writing
When buying a new vehicle, salespeople will try to pressure you to buy right away. If you haven’t had the time to shop around yet, you shouldn’t feel obligated to decide on the spot. Instead, ask the dealership to give you a written offer for the trade-in value of your current vehicle. You can even have them set a time limit on the offer, such as 7 or 14 days. By doing this, you can continue to shop around to see what other offers are out there. Additionally, you could show other dealers your offer to see if they’ll beat it.
Don’t be afraid to sell your car on your own
Even though trading in your vehicle is the easiest thing to do, selling your car on your own could get you significantly more money. To ensure you get the best price, make sure you have all of your paperwork ready such as the registration, maintenance records, owner’s manual, and keys. Most interested buyers will likely want to take the vehicle to their mechanic of choice for an inspection, so factor that into your time. Be sure to agree to a price before this inspection. If everything checks out, you can close the deal. If their mechanic finds any issues, you can decide on lowering the price or cancelling the deal.
Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog
Money We Have is one of Canada’s most trusted sources when it comes to money and travel. As a completely self-taught, do-it-yourself investor with no formal training, he makes money easy to understand for all Canadians. His specialties include personal finance, budget travel, millennial money, credit cards, and trending destinations.