Trading in a car can be a simple process, but there are a few things to keep in mind. The process generally follows the same steps, but how it all comes out in the end depends on equity.
When is it Time to Trade In?
If you need a new vehicle, one of the best ways to cover some of the costs of a down payment can be with the equity in a trade in – equity being the difference between your car's value and the amount you have left to pay on a loan. But if there’s no equity – or, worse yet, negative equity – in your current vehicle, trading it in won’t contribute anything to your down payment.
If you own your car outright, or it’s financed but worth more than the loan balance, you have equity. If your vehicle is worth less than what you owe, then you have negative equity. This is also known as being upside down or underwater on your loan.
It’s best if you trade in a vehicle that has equity. You can either pocket the cash difference, or use it as a down payment on your next car. If you trade in while you’re underwater, you may have to make up the difference out of pocket between what you owe and what the dealer will give you for your vehicle.
It’s possible that a lender may be willing to roll your negative equity into another loan – but don’t count on this if you’re upside down. This isn’t offered to everyone, and you should use caution if it is. By rolling what you still owe into another loan, you end up paying more in the long run with a higher payment and increased interest charges.
Once you determine it’s time to trade in your car, you’re going to want to get the most you can for it. In order to find out if you’re getting the best price, you should start by researching on valuation sites such as NADA Guides. These sites can give you estimates of the approximate value that similar vehicles have received. Keep in mind these are only estimates – the value of your car will be determined by the dealership in a trade in.
You can help yourself out before you take your vehicle in for an appraisal by making sure it’s in good condition. Clean it thoroughly inside and out, and take care of any small dings or scratches. Things like new tires and a fresh oil change are good to do, but don’t sink too much money into a car that you can’t or won’t recoup.
Where to Trade it In?
Dealers base vehicle values on factors such as current market value and condition. To get the most out of your trade-in, it’s in your best interest to get an appraisal from at least three dealerships. Make sure you visit at least one dealer from the same make to get a feel for what your car is worth, and choose the dealership that gives you the best offer.
Don’t Know Where to Begin?
If you’re ready to trade in your vehicle, but are afraid your credit will stand in the way of a new purchase, let us help. Here at Auto Credit Express, we specialize in helping people with less than perfect credit find dealerships that have the lending resources to get you approved. Our network is nationwide, and the process is simple to start. Fill out our easy, no-obligation auto loan request form and we’ll begin the process of matching you with a local dealer today!