There are several reasons why you might want to consider trading in your car for a cheaper one. You could be facing a temporary downturn that may throw you in a financial curveball. If you can no longer maintain your monthly outlay, then trading in your car for a cheaper one is an option to help you get back on your feet.
And no, it doesn’t mean you’re losing it all. Usually, cheaper cars offer better gas mileage and cost less in insurance premiums.
In this article, we share all the ins and outs of trading in a car for a cheaper one. This includes details on trading in a financed car and useful tips to get fairer terms when negotiating for a deal.
How to Trade in a Car
Whether you’re trading in a newly acquired car or one that you’ve had for years, the process is pretty straightforward. On a basic level, you’ll want to visit a dealer and choose the new car you’d like to get in exchange of the current one.
Regardless of how your car looks like, the dealer will assess the car’s condition using a standard publication, usually the Kelly Blue Book (KBB). A few key factors they will take into consideration include the car’s model and make, miles covered and actual condition.
Once the trade-in value of your current car is determined, the dealer will subtract that value from the amount you owe on the deal. The process will often be easier if your current car’s trade-in value is more than the amount you owe on it.
Can I trade in my car for a cheaper one if it’s financed?
Absolutely! It’s possible to trade in a financed car. In fact, most used car dealerships including Motors on Wheels have no problem accepting a vehicle that’s not paid off yet.
However, it’s important to know that trading in a financed car will not make the loan disappear. You’ll still need to pay the remainder of the loan even if you’ve handed the car over to the dealership.
Trading In a Car with Positive Equity
Positive equity is when the trade-in value of your car is worth as much or more than what you owe on its loan. Positive equity can make a whole lot of difference when trading in your vehicle.
If your car’s trade-in value is worth more than you owe, the dealer will apply the equity on the purchase of the new car. For example, suppose the dealer gave you $30,000 as trade-in value and you still owe $25,000 on your current car.
In this case, the dealer will simply pay off the $25,000 loan balance and apply the $5,000 equity toward the purchase of the cheaper car. This will reduce the amount you’ll need to finance.
Trading in a Car with Negative Equity
You have negative equity if your loan exceeds the trade-in value of your car. When you owe more on the car than it is worth, you’re “underwater” or “upside-down” on your car loan.
For example, let’s say your car’s market value is $20,000 and you owe $22,000 on its loan. This means you have a negative equity of $2,000.
If you want to trade in a car with negative equity, you’ll need to reconcile that negative equity first before moving forward. You can do this by paying the difference out of pocket or rolling the negative equity into a new loan.
The problem with rolling this amount into a new loan is that you’ll be even more upside-down in the new loan. Also, you may end up creating a vicious negative equity cycle that’s difficult to escape.
How to Get a Good Trade-In Deal
So you’ve decided to trade in your used vehicle. How do you ensure that you get the most out of the deal? Here are three effective tips you will find useful:
Your Vehicle Needs To Be in Pristine Condition
First impressions count and for this, your car needs to be in good shape. Fix those small dents on the exterior using a paintless dent remover. Also, have the car detailed or at least, washed and vacuumed. Finally, change the filter, lube and oil to increase your car’s appraisal value.
Find Your Car’s Trade-in Price
Do some competitive research in advance to know what your car is worth. This will help you when negotiating a fair price. Car appraisal tools like Kelly Blue Book and Edmunds can come in handy here.
You’ll also want to monitor sites like AutoTrader and Cars.com to determine what dealers are asking for similar cars with the same mileage as yours.
Compare Dealership Prices
It’s advisable to get written trade-in quotes from at least three competing dealerships to find the best deal. This will go a long way in strengthening your bargaining position.
Furthermore, consider dealers who offer special promotions with trade-ins. Trading in at the end of the month when salespeople are trying to meet sales quotas could also see you get a better deal.
Trade in Your Car at MoW
If you’re looking to trade in your car for a less expensive model, Motors on Wheels is your best bet in Houston, Texas. We offer the best deals around and are ready to match and even offer more cash than your favorite dealer does.
Need financing? We can offer you that too to ensure that you get a car you’re comfortable with. We simply take the car off your hands and get you another one that fits your needs and budget. So go ahead and fill out our simple form here and we’ll get back to you within a day.