When is the Best Time to Trade In a Car?

Car owners might be bored of driving their current car. As new models are introduced, consumers might notice that they have cooler features or a new or unique design. Some car owners might just not like their current car or they are in a place financially where they can afford their dream car. Others might be interested in purchasing an electric vehicle.

When consumers are ready to purchase a new car, they might decide to trade in their current car to help offset the new purchase. When is the best time to trade-in a car? Is there an ideal time? The best time to trade in a car might be when:

  • The current car is paid in full
  • A lifestyle change requires a larger vehicle
  • Equity is built up in the current car

Trade-In When the Car is Paid in Full

The best time to use a car for a trade-in is when the vehicle’s loan is paid in full. Once the car owner has full ownership of the vehicle and the lien is removed from the lender, the car likely has equity and offers some value to the owner.

The amount of equity in the car depends on many factors. However, car owners can use Kelley Blue Book (KBB) to research the value of their vehicle. To do this, car owners can either use the VIN or license plate information; they also could start their research on KBB by simply entering the make, model and year of the vehicle.

KBB also will ask about the color, mileage, trim, and any additional features. Car owners also will need to select an appropriate condition of their vehicle. They should be upfront about the condition, as this impacts the value. Over estimating the condition will just result in an inflated value.

After car owners have entered all the information about their car, KBB will show them an estimated value and a range, too. Owners can then use this as a basis for how much a dealership could offer them for their car.

What if the vehicle still has a loan? The car can be used as a trade-in even with a loan, but if the loan balance (or payoff amount) exceeds the value then the car is known to be underwater (or it has negative equity). That negative equity could be rolled into the loan for the new car, but doing this also could make the new car fall underwater in value.

For this reason, car owners should understand the equity in their car and how it relates to the value. The best situation is to pay off the car in full and then use it for a trade-in.

Best Time to Trade In a Car

Trade-In to Accommodate a Lifestyle Change

For some car owners, a new car is necessary to accommodate a growing family. Some car owners also could have medical issues that leave them feeling uncomfortable in their current car; they might need a larger car with more space in the front seat.

Sometimes external issues leave car owners on the hunt for a new car. Again, though, before a car owner uses their current car as a trade-in they should research the car’s value. This can help owners understand how much their car is worth and if they are getting a fair offer from the dealership.

Trade-In When the Car Has Equity

While a car that no longer has a loan tied to it might be easier to use as a trade-in, dealerships will still accept financed cars as a trade-in. For the owner, equity in the car represents money that could be allocated to help offset the purchase of the new car.

When the value of the car exceeds the amount owed on the loan, the car has positive equity. This equity is what the dealership will apply towards the purchase of the new car.

Again, if the car has negative equity it might be able to be rolled into a new car loan; however, tacking negative equity onto the purchase of a new car could lead to the new car being underwater instantly.

Is Now the Best Time to Trade-In?

Car owners who are paying attention to the auto market might realize that used cars are selling higher; in September, the average price of used cars was more than $28K. Does this mean that dealerships will offer more money for a trade-in?

Higher market prices might not always correlate to high trade-in offers. Some cars are more desirable than others and might be more lucrative for the dealerships.

KBB reports that now is a good time to trade-in a car, though. The site notes that less expensive vehicles are more difficult for buyers to find used ; the reason is that in 2008, these cars weren’t produced less cars from 2008 and a few years after the recession.

Car owners with older vehicles could get a good offer for their trade-in. Again, though, car owners should research the value of their vehicle via KBB so they know if they are getting a fair offer from dealerships.

Some dealerships offer trade-in calculators or other tools to help car owners understand how much they might receive for their trade-in. These tools can be helpful for car owners. In addition, car owners could get different offers from dealerships; just because one dealership offered a lower price doesn’t mean that all dealerships will offer low, too.

Online car sites like Carvana also buy cars. Car owners could inquire about offers from these and other companies.

Best Time to Trade In a Car

Should Car Owners Sell the Car Privately?

KBB let’s car owners view the trade-in value of their vehicle and the resale value, too. The resale value is higher than the trade-in value, and this is due to the fact that dealerships need to build in a profit when they buy a car as a trade-in.

Dealerships are the middle man of the deal. They will buy the car and sell it to another buyer. The dealership might need to build in costs associated with fixing up the car, too.

Selling the car privately can let car owners maximize the price they can receive for their car. Not every car owner wants to take on the role of seller, though. When selling a car privately, owners will need to research the value, clean up their car, obtain a Carfax and make any repairs.

Owners also will need to decide the platform on which they want to list their car for sale. They also will need to figure out the safest way to accept payments.

When selling a car, owners need to be safe. They should meet buyers somewhere public and take a friend or relative with them for test drives and other meetups.

If a car still has an outstanding loan balance, car owners should contact their lender before listing the car for sale. The lender might have stipulations for how to handle the sale. In addition, the lender also can provide the payoff amount for the loan.

Not all car owners want the responsibility or possible stress of handling the sale of their car. For some car owners, selling the car to a dealership as a trade-in might be the simplest option.

What if the Dealership’s Offer is Low?

Car buyers might want to handle the entire process at one dealership. When buying a car, dealerships can be the middleman for helping buyers get financed and they also can purchase the car as a trade-in.

For some buyers, the dealership is a simple one-stop car stop. However, some car owners might wonder if they are getting the best deal for their trade-in.

When visiting the dealership, car owners can bring along a print out of their car’s value via Kelley Blue Book. If car owners feel like they aren’t getting the best price for their car, they might walk away and see what another dealership offers them.

Since Covid, many dealerships have offered more online resources for buyers. Dealerships could provide tools that help buyers understand the value of their trade-in. Buyers might be able to reach out to dealerships online to get an estimate for their trade-in.

Once buyers have a few offers for their car, they can make their final decision on where to sell or trade-in their car. What if a dealership offers a standard offer for a trade-in?  Some dealerships might have a promotion where they purchase a car for a flat rate no matter the condition. While this might be a good deal for older and more worn out vehicles, car buyers need to research if this deal is good for their vehicle.

The goal is to get the best offer for the car. Sometimes getting the best price means shopping around to obtain offers from multiple dealerships. Again, car buyers also could decide to sell their car to an online-based company, too.

Best Time to Trade In a Car

Sometimes a Trade-In Is Inevitable

While the best time to trade-in a vehicle might be when the car is paid in full or has accumulated a decent amount of equity, some car owners might face a lifestyle change that means they need a different vehicle. Before offering their vehicle as a trade-in, car owners can use sites like Kelley Blue Book to understand how much they might receive for their car. In addition, car owners also could shop around to find the dealership that’s willing to make the best offer for their vehicle.