If you have a trade-in you want to use toward the down payment requirement on a bad credit auto loan, you need to know just how much it’s worth first. You can use vehicle valuation sites to get an estimate, but your best bet is to take your trade-in to a dealership and have it appraised.
Determining What Your Trade-In Is Worth
Visiting car valuation sites such as NADAguides is a good place to start finding out what your trade-in is worth. These services provide estimates based on your vehicle’s year, make, model, mileage, condition, and more.
Valuation sites give you a ballpark estimate of just how much your trade-in should be worth, but you need to get it appraised by a dealer to know its true value. Better yet, you should get it appraised by multiple dealerships to view and compare offers. We recommend that you go to at least one franchised dealer that sells your specific make.
When you get your trade-in appraised, you’re getting the car’s actual cash value (ACV), so you know exactly how much your trade-in is worth – the dealership is telling you straight up what they’re going to buy it for.
Keep in mind that if the dealer won't negotiate the ACV, or you’re not getting the deal you were hoping for, you can always walk away. Or, you can try to sell your car yourself to get more money for it.
Trading in a Car with Equity and Negative Equity
If you took out a loan for your current vehicle, you should know if it has equity or not before you decide to trade it in. Having equity means your vehicle is worth more than what you owe on its loan, while having negative equity means it's worth less than what you owe.
Once you have your vehicle's ACV from a couple of appraisals, you can determine your equity situation by requesting a 10-day payoff amount from your current lender. Then, take your trade-in's ACV and subtract it from the 10-day payoff amount, and the result is your equity situation.
If you trade in a car with equity, the dealer takes care of paying off your existing loan and gives you the equity. You can apply it as a down payment on your next vehicle, or keep it for yourself (as long as you meet any down payment requirement).
On the other hand, most lenders don't allow you to trade in a car with negative equity if your credit is poor unless you're able to cover the difference in cash. Some lenders may allow you to roll over the difference into your new auto loan, but this isn't a smart idea – unless the amount of negative equity is very small.
The reason why is because rolling over negative equity inflates the cost of your new loan, and puts you in a negative equity situation with the new car from the start. In most cases, you're better off waiting to trade it in until your vehicle is paid off or you have equity in it.
How to Increase Your Trade-In’s Value
Now that you know what you need to do to find your trade-in’s value, how do you increase its ACV? Although it isn’t a guarantee that the value is going to increase, it doesn’t hurt to try these three tips if you’re looking to add to its resale value:
- Clean it – You don’t need to have it detailed necessarily, but make sure the vehicle is cleaned inside and out. Vacuum the interior, wipe down all surfaces, and take it through the car wash.
- Fix small things – If you see any small scratches or dents, make sure they’re touched-up or removed before getting it appraised. If your car needs any big repairs, it's probably not going to worth it for you to take care of them. The dealer can have repairs done more cheaply than you, so you likely won't be able to recoup what you spend on repairs in trade-in value.
- Keep service records – You don’t need to have service records, but it doesn’t hurt to bring them in if you do. Having them available shows the dealership you’ve been following the maintenance schedule and taking care of your car.
Are You Ready to Trade in Your Car?
If you feel ready to trade in your vehicle but don’t have a dealership to work with, we want to help. Auto Credit Express works with a nationwide network of special finance dealers that specialize in getting people with bad credit financed.
We'll work to match you with a local dealership if you start the process by filling out our free and fast auto loan request form.