If your current car is in good shape, but you’re ready for a new set of wheels, you have the option to trade it to a dealer and get monetary credit toward your new purchase. Although you typically receive less money when you trade in a vehicle as opposed to selling it yourself, you also have to do less legwork.
Make sure you get the most for your trade-in by taking these actions:
- Know your car’s value: Online tools, such as NADA (National Automobile Dealers Association), make it easy to learn a car’s trade-in value. Print out the results and take them with you to the dealership.
- Get a couple of quotes: Have at least two different dealerships provide a quote. Factors that influence trade-in value include the condition of the vehicle, the dealer’s current inventory and consumer demand for your make and model.
- Negotiate: Dealers tend to start with a low trade-in offer, so you should always see if they can do better. This is especially important if their offer is lower than what your research suggests the car is worth.
- Trade and buy at the same dealership: You’ll have more leverage to negotiate the trade-in value if you plan to purchase a vehicle at that same dealership. You might say something like, “If you can improve on the trade-in offer, I’d love to do business with you.”
Rebates and Incentives
Dealers may offer rebates or incentives on particular models or for certain types of buyers—such as those who are new to the brand—as a strategy for increasing sales. If these deals align with your needs, you can save thousands by using them to your advantage. Here are some rebates and incentives you might encounter:
- Customer cash: Manufacturers may offer a loyalty bonus when you buy the same model of a vehicle that you already own, or they may offer a bonus for switching brands.
- Dealer cash: The manufacturer offers this incentive to the dealer to reduce the amount the dealer pays for the vehicle. While dealers don’t have to pass on these savings to customers, it can give a salesperson more room to negotiate, especially if the company is aiming to reach a certain sales target.
- Low-interest financing: If you have excellent credit, you may qualify for a car loan through the dealership that charges no, or very low, interest. Be sure to compare rates with those from your financial institution to be sure you’re getting the best deal. You may sometimes have to forgo other incentives to get the dealer’s lowest interest rate, which may make a slightly higher rate better in the long run.
It’s standard practice for a new car to come with a bumper-to-bumper warranty that covers most engine and body issues for a period of time. Dealers may also encourage buyers to purchase an extended warranty to cover repair costs after the basic warranty has expired.
If you’re unsure whether you need this added expense, ask yourself these questions:
- How long do I plan to have the car? If you plan to have the car for a long time or pass it on to your children, an extended warranty might make sense. If you plan to sell or trade in five years, the basic warranty should be sufficient.
- Am I getting the best warranty offer? You can purchase an extended warranty any time before the manufacturer warranty expires. There is no reason to feel pressured to buy it at the same time you purchase a car. Besides, dealership warranties can be more costly. Shop around for one that is backed by the automaker. Once you have estimates, you may be able to negotiate a lower warranty price.
- Do I tend to own cars that need repairs? Add up how much you've spent on out-of-warranty repairs in the past and compare the total to the price of the warranty. You may find you’re just as well off paying for repairs out of pocket.
- Can I transfer the warranty? A transferable warranty can be an appealing selling point for prospective buyers if you plan to resell your car in the future.
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