Here's what to know about trading in your used car
If you have a used car, now may be a good time to pull the trigger on trading up.
The average trade-in value for all used vehicles reached an all-time high of $17,080 in March 2021, according to a report by automotive website Edmunds.com.
The pandemic wreaked havoc on automobile supply chains, leading to several key shortages that tightened the supply of new vehicles. As a result, consumers are turning to the used market in search of more alternatives and better value.
“If you plan to purchase a new car and trade in your existing vehicle, you’ll be in an excellent position to get top dollar for it,” said Laura Adams, a personal finance expert. “The most desirable cars will be under two years old and in excellent condition.”
But trading in a used car for a newer vehicle isn’t the right move for everyone. Here’s how to tell if you should sell or trade in your car and how to get a good deal.
Should I sell or trade in?
When you’re looking to get rid of your car, you have two main options: sell it in a private transaction or trade it in at a dealership.
When you sell privately, you’ll usually get top dollar because most buyers aren’t experienced hagglers. But it might take considerable effort to list the car, field questions from potential buyers, and handle the paperwork.
“If you prefer to streamline the transaction and reduce the time and hassle of selling a vehicle, trading it in will give you a fair value, especially right now,” Adams said.
There’s also a tax advantage when you trade in, versus the two-step process of selling the car privately and buying a new car from a dealer. Most states charge sales tax only on the difference between the trade-in value and the new car price. So if you trade in your old car for $5,000 and buy a new car for $15,000, for example, you only pay sales tax on $10,000. This could help you save money on your tax bill.
How to get a good deal on your trade-in
If you decide to trade in your car, be prepared to negotiate with an experienced salesperson. Consider following these tips to maximize your trade-in value:
Research your car’s value. Head to a third-party website — such as Edmunds.com, Kelley Blue Book, or the National Automobile Dealers Association — for a free appraisal report. These services estimate how much your car might sell for based on details like the make, model, mileage, and condition. All of this information can help you negotiate a fair price.
Give your car a deep cleaning. Remove your personal items, wash the interior and exterior, and vacuum the floors and seats. This can help dealers visualize your car on their lot.
Show your maintenance records. Receipts from car repairs, replacements, oil changes, and tune-ups can help prove how well you’ve taken care of the car, as will a vehicle history report. These details can help support the asking price on your trade-in.
Negotiate the new purchase and trade-in value separately. Some dealers will increase the price of the car you want to buy to make up for agreeing to a good price on your trade-in, but you can get around this by negotiating each price separately, starting with the trade-in. Check each price against online guides, and ask for the offers in writing.
Which vehicles have the highest trade-in value?
In the Edmunds survey, trucks commanded the highest trade-in prices among all consumer vehicles. These retained about 65% to 80% of their value on average, while SUVs retained about 60% of their value and midsize cars kept 58% of their value when traded in.
“Many Americans enjoy driving larger vehicles, such as trucks and SUVs, that are comfortable and have good safety ratings,” Adams said. “In addition, trucks are commonly used in many industries for business purposes.”
No matter which type of car you have, it could be worth more now than it was a year ago, which is a rarity in the used-car space. That means you could get top dollar for trading in your vehicle for something newer.