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How Does Trading in a Car Work?

Posted by Charlie Maniates | Apr 22, 2019

Trading in a used car to a dealership is the easiest way to pass it off for an upgrade. The process is much simpler than finding a buyer and selling it yourself, but there are some guidelines you should follow to maximize the dealer’s offer. Follow along for our tips on how to trade in a car:

Prep the Car

Before taking your car to the dealer, proceed as if you were going to sell it and thoroughly clean it to eliminate any dirty marks, stains and odors. After it’s in a good hygienic state, tend to any minor problems you can fix yourself such as low fluid levels, busted lights, buffable scratches or low tire pressure. Leave any major work for the dealer to handle -- more serious problems will negatively impact your car’s trade-in value, but the repair costs are more likely than not to outweigh the added value.

Gather the Car’s Documents and Accessories

Once the car is prepped, organize all the important documents you’ll need to transfer ownership to the dealer. These include the title, registration information and any service records that show the car has been properly maintained while in your possession. Additionally, remember to bring along all spare keys, key fobs and any other important accessories.

Find Out How Much the Car Is Worth

It’s important to understand your car’s trade-in value before you visit the dealer in order to have a sense of the offer you’ll get, especially if you’re relying on its value to decrease the cost of a new car. Be sure to check its Black Book value, which is calculated by analyzing the prices dealers are paying at auction for similar vehicles. This should give you a good starting point for your negotiations, but keep in mind that negative factors like mechanical problems, body damage or signs of poor maintenance will lower this opening figure.

In some states, trading-in will allow you subtract the older car’s value from the price of its replacement, decreasing the sales tax you pay, a major advantage. In this case, you’re bound to trade-in where you buy new rather than selling to a different dealership, but you should consider the entire transaction as negotiable and insist on a fair trade-in value.

Visit the Dealership

After you’ve researched your car’s value, head to the dealership with all the items you organized earlier and let the salesperson know you’re looking to trade in your vehicle. He or she will do a quick visual inspection, then run the vehicle identification number through a historical database and possibly have the service department do a more thorough inspection to test its mechanical functionality. Some dealers may even have an employee take it for a test drive.

Get an Offer

Following your car’s examination, a salesperson will give you an offer. The offer will be based on the Black Book value you researched earlier, but could also be affected by your vehicle’s condition, the number of repairs it needs or how many cars similar to it the dealer already has on the lot.

Offers from multiple dealers may not be drastically different from one another because they’re all operating within the same market, but shopping around is still something you should consider if you’re in a state where there’s no tax advantage to combining the transaction. Interest in your car, and how much you’re offered for it, depends on whether the dealership believes it can make money by reselling it, and that assessment varies from one shop to the next. Depending on the discrepancies, you can potentially use a collection of offers in your negotiations with each individual dealer.

Complete the Paperwork

The trade-in culminates with the transactional paperwork after you’ve accepted an offer. If you fully own the vehicle, it’ll be a fairly simple process of transferring the title to the dealership and receiving your payment, or using the offer to reduce the cost of a vehicle purchase if you found a car you want at that particular dealership.

If you still owe money on the car, the dealer will have to wait for your lienholder to transfer the title before finishing the trade-in. And, if the offer you accepted is less than the balance on your loan, you’ll have to pay the difference out of pocket. You can avoid this unfortunate situation on your next vehicle purchase by maximizing your down payment and limiting the length of your loan to 48 months or less.

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