When purchasing a new or used car, savvy buyers take steps to get the best possible price for their desired vehicle. Presenting a trade-in car at the time of purchase is arguably the best method of lowering the final cost of a new automobile.
With high prices across the board, used cars are a popular choice for shoppers. The average listing price for used vehicles at the end of 2024 was $25,565, compared to the average transaction price of $49,740 for new cars. Used inventory will remain tight for years, and many dealerships will pay top dollar for trade-ins to get metal on their lots. We’ll tell you about how trade-ins work, what to expect, and give some tips on getting more money when you trade your car.
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- What is a Trade-in?
- How Do Trade-ins Work?
- Where Does the Trade-in Value Come From?
- How Much Can I Expect From My Trade-in Vehicle?
- How Can I Maximize Trade-in Value?
- Bottom Line on Maximizing Trade-in Value
What is a Trade-in?
A trade-in car is a vehicle you offer to the dealership for credit toward the price of the automobile you want to purchase. Generally, a trade-in can be any vehicle with value, but the amount for the trade-in can vary greatly. Factors that determine the value of your trade-in include your car’s mileage, condition, the demand for that particular make and model, and your skill at negotiating a price.
The moment a new car leaves the lot, it begins to lose value, which is known as depreciation. It continues each year until the car no longer has any resale value. The resale value is the highest amount you’re likely to get using your car as a trade-in. Cars tend to depreciate the fastest during the first five years of ownership. That makes depreciation one of the most significant expenses of car ownership.
MORE: How to Buy a Car in 10 Steps
So How Does It Work?
Your existing vehicle doesn’t lose value simply because you select to purchase another from a car dealer. Your existing vehicle has a “trade-in value” with the dealer based on the automobile’s market value. This credit can significantly lower the price of your new purchase.
The trade-in value is the amount that a car dealer pays you toward the purchase price of a new or used car in exchange for your old car. The savings can be in the thousands depending on the quality of your trade-in. A lower price also means a cheaper car payment if you finance the purchase.
TIP: Did you know you can trade in your car and earn tax savings in certain states? That’s right. Some states allow you to pay less sales tax by deducting the value of the trade-in from the taxable amount of the vehicle you’re buying.
Where Does the Trade-in Value Come From?
The car’s trade-in value is based on the market price for that specific vehicle. This market price may be difficult to determine unless your vehicle happens to be in pristine condition. If yours is a rare automobile with no damage or work needed, then the trade-in value should be slightly less than the Kelley Blue Book Value for your car.
The Kelley Blue Book Value is a price for a particular automobile make and model from the largest automotive valuation company in the U.S. Listed automobiles get appraised, and market values are assigned. The best values come from undamaged vehicles that do not need repairs. These values are the best price a seller can potentially get for such a vehicle if sold directly to a consumer.
How Much Can I Expect From My Trade-in Vehicle?
Most trades will not get top Blue Book Value unless they are in perfect condition because that price leaves no room for dealer profit on resale. Besides, few used cars actually qualify for full market price. While you avoid the headaches of selling to a private party, your trade-in will likely receive an offer below its actual resale value. Typically, it’s any estimated repair costs, allowing the dealer to repair and resell the vehicle at a profit.
The trade-in value for most vehicles is negotiable. However, the buyer should know a few things before taking the trade-in vehicle to the dealer for an appraisal.
Modifications Can Affect Value
Aftermarket modifications to your ride can negatively impact its value at trade-in time. Non-factory paint jobs or flashy wraps might look good to some people, but the pool of potential buyers narrows when a car visibly stands out from others. The result is that dealerships offer less for modified vehicles compared to those looking like they did right off the assembly line. Similarly, custom exhaust systems and lowered or lifted suspensions may reduce trade-in values because of limited appeal or warranty issues. Using Kelley Blue Book and Autotrader’s Private Seller Exchange to sell your customized car is an option that might generate a better return than trading at a dealership.
How Can I Maximize Trade-in Value?
The vehicle should look its best for you to get the best trade-in value possible. A cleaned and detailed car is worth more at trade-in than a worn and poorly maintained one. You might consider detailing your vehicle and making any minor car repairs. Fixing issues like windshield damage or minor engine issues, and cleaning it before an appraisal by the dealer can net hundreds more on the trade-in.
RELATED: DIY Car Cleaning Hacks: 20 Household Items
The trade-in value you receive for your old vehicle can equal instant savings when purchasing a new car. Using a trade-in lowers monthly payments on a financed automobile. You can apply that value to a more luxurious model or add a few more options. Whatever your choice, trading in your existing vehicle is an excellent way to rid yourself of an old car.
Try a Cash Offer
In addition to providing valuations, Kelley Blue Book offers a tool that eliminates the hassle of trading or selling your old vehicle. KBB’s Instant Cash Offer is a genuine offer for a specific amount to purchase your car or to apply toward another car.
The offer is valid for seven days and can be immediately redeemed during business hours at any participating dealer, pending inspection. It’s based on the specific condition, car features like installed options, and local market demand.
Bottom Line on Maximizing Trade-in Value
Trading in your car can significantly reduce the purchase price of a new vehicle, lower monthly payments, and even offer tax savings in certain states by deducting the trade-in credit from the transaction price before calculating the sales tax. The trade-in value depends on factors such as the vehicle’s mileage, condition, and demand, and your negotiation skills. To maximize trade-in value, ensure your vehicle is in the best possible condition by addressing minor repairs, detailing it thoroughly, and researching its market value using Kelley Blue Book tools.
Editor’s Note: This article has been updated since its initial publication.
