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When Should You Trade In Your Car?
Trading in your car can be a convenient way to sell it and purchase a new vehicle simultaneously. However, it’s not always the best option. While selling to a private party can yield more money, a trade-in can save you the hassle of selling your car on your own. Here are some scenarios where trading in your car makes sense:
Good Equity
If your car is worth significantly more than your remaining loan balance, you can use the difference to reduce the cost of your new vehicle. In some cases, you might even receive a portion of the proceeds in cash.
Low Mileage
Cars with fewer miles depreciate less. Experts suggest trading in a vehicle before its factory warranty expires, typically between 36,000 to 60,000 miles. Vehicles with less than 100,000 miles are more appealing to dealers, potentially offering you more value.
High Credit Score
Trading in a car usually means buying a new one. While auto loans are available for all credit scores, having good or excellent credit can help you secure better interest rates.
Large Down Payment
If you owe more than your car’s worth, a trade-in might not be ideal. However, if you have a substantial down payment to cover the deficiency, it could still be a viable option.
When Should You Not Trade In Your Car?
There are also situations where trading in your car might not be the best choice:
Negative Equity
Negative equity means you owe more than your car’s current value. While you can still trade it in, the dealer will likely add the deficiency to your new loan, putting you in a precarious financial position if the new vehicle gets totaled.
Credit Needs Improvement
Your credit score doesn’t affect your car’s trade-in value but does impact the interest rate on your next vehicle. If your score is in the mid-600s or lower, consider improving it before proceeding.
Desire for More Money
While trade-ins are convenient, selling your car privately can yield more money. Private buyers don’t resell for profit like dealerships, allowing you to pocket the extra cash or put it towards your next car.
Should You Sell Your Car or Trade It In?
The decision to sell or trade in your car depends on various factors. Financially, selling privately will net you more money, but the process can be time-consuming and stressful. You’ll need to clean the car, take photos, post ads, handle calls, arrange test drives, and negotiate with buyers. There’s no guarantee of a quick sale, and you might be without a car for a while.
On the other hand, a trade-in is quicker and more straightforward. You can often leave the dealership with your new car the same day. Consider your personal preferences, available time, and use tools like Kelley Blue Book to compare trade-in and private-party values before making a decision.
How to Trade In a Car
To ensure you get the best deal on your trade-in, follow these steps:
Determine Your Car’s Value
Use Kelley Blue Book or similar services to estimate your car’s trade-in value. These tools provide a range based on your car’s condition, offering a starting point for negotiations.
Prepare Your Car
A clean car usually fetches a better offer. Consider fixing any recalls and making minor repairs to enhance its value.
Get Multiple Offers
Shop around to get offers from different dealers. Even if you have a preferred dealership, other offers can be useful during negotiations.
Be Ready to Negotiate
Once you’ve chosen a dealer, bring your car in for an inspection. The dealer will provide a more accurate value, and you can negotiate from there. Keep your service records handy and be prepared to walk away if necessary.
The Bottom Line
Trading in your car can be a good option if you want to avoid the hassle of selling it yourself. However, it’s essential to consider your situation and research all options to make the best decision for you and your vehicle.
For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you with all your mortgage needs!
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