How long you should wait to trade in your vehicle ultimately depends on your current loan. There’s no specific time frame you need to follow, but the general rule of thumb is to wait until your car has equity before you go to trade it in.
Factors That Affect Your Trade-In
Even if your vehicle is paid off, finding the right time to trade it in can be tricky. The reason why is because depreciation affects your car’s value over time. This makes it the biggest factor that affects your trade-in. Depreciation is constant, and your vehicle will begin to depreciate as soon as it leaves the lot. Because your car will take its biggest depreciation hit after the first year, dropping from there, it’s best to wait until its depreciation rate levels off at around year three.
Besides depreciation, you’ll need to keep these three things in mind when thinking about trading in your car:
- Vehicle’s age – How old is your vehicle, and how many miles have you put on it? If your car is only a few years old with less than 50,000 miles, you’ll typically get a better price for it when you trade it in.
- Vehicle’s actual cash value – How much is your vehicle worth right now? This is determined by your car’s actual cash value (ACV). You can get an estimate of your vehicle’s ACV by visiting sites such as NADA guides, or you can get an appraisal from a dealer.
- Equity – Finally, how much equity do you have in your vehicle? If you still owe on your auto loan, you can determine if you have any equity by taking your car's ACV and subtracting it from your loan payoff amount. For example, if your vehicle is worth $8,000 and your loan amount is $6,000, you have $2,000 in equity. This equity can be applied toward your next car if you trade it in. When you owe more than the vehicle is worth, then you have negative equity. Some lenders may let you roll over negative equity, but it'll be added to the new loan.
Trading In a Car with Bad Credit
If you want to trade in your vehicle for a new one, but worry your bad credit will be in the way, turn to Auto Credit Express. We help car buyers get the financing they need by setting them up with local special finance dealers. The dealerships in our nationwide network know what it takes to help consumers get financed, even when they're dealing with unique credit situations. Start the process by filling out our secure and free auto loan request form today!