What is the trade-in value of a car?

When you’re looking to buy a car – whether it’s brand new or second hand – you may want to sell your old car at the same time. But is trading in your old car a better option than selling it separately? Let’s take a look at some of the factors to consider.

What is the trade-in value of a car?

The trade-in value of a car is the amount that a dealer is willing to offer you for your current vehicle which would go towards the purchase of a new car. It’s typically based on the market value of your car (the amount it would sell for on the open market).

The trade-in value can vary depending on a number of factors, such as:

• The popularity and seasonal demand of the make and model.
• Whether there are any end-of-year discounts being offered by dealers.
• How many similar cars the dealer already has on the lot.
• The age and condition of the vehicle.

The price of fuel may also have an impact, as if the price of petrol and diesel is high, the demand for fuel-efficient vehicles like hybrids and electric cars may also increase. Dealers will often offer a price that is thousands of dollars less than you may get when selling your car privately.

To help estimate the trade-in value of your car, websites like Carsales and Redbook, offer free online valuation tools. You’ll need information such as your car’s make, model, year, body and fuel type and its mileage in order to get the most out of these tools. You can then compare your vehicle to similar ones that are listed for sale in your area. Using multiple valuation tools can help you get a more realistic valuation. It’s important to note that the trade-in value offered by dealers will generally be lower than private sale valuations due to dealer overhead costs and profit margins.

Should I trade in my car or sell it privately?

When it comes to upgrading to a new car, there are a few different ways to go about it. You can sell the vehicle privately, or trade it in with a dealer. With a dealer, you will have the choice between a car trade-in with the money going towards the next car purchase at the same dealership, or a cash payment. Below, we consider potential pros and cons of trading in your car.

What are the pros of trading your car in?

There are a few advantages to trading in your car. These include:

• Trading in with a dealer is generally seen as a quick and convenient option, as you can avoid advertising and meeting with potential buyers.
• Trading in may offer a more straightforward solution, particularly if your car is a common model, requires repairs or has a lot of kilometres on the odometer. Some dealers may deduct the cost of any repairs required from the price they offer you for your vehicle.
• Trading in your old car could mean lowering the amount you would need to pay for the new vehicle.

What are the cons of trading your car in?

There can also be some disadvantages to trading in your car. These include:

• Dealers won’t necessarily offer you the full value of your car, as they will later likely seek to sell it at a profit. This may be particularly true if your current vehicle is a relatively recent model, or in high demand.
• With a trade in, the value of your vehicle is usually used solely to offset the cost of a new vehicle. However, it may also be possible – albeit less common – to trade your car in with a dealer for cash.
• In some cases, a dealer may decline to buy your car, particularly if it is old or in low demand.

Selling your car privately

If you do decide to sell your car privately, there are a few things you can do to give it the best chance of selling. The advertisement itself is an important place to start, as that’s where potential buyers will get their first impressions of your vehicle. Cleaning and detailing, as well as taking quality photos of your vehicle, can make your car look as good as it can. Writing a summary with key details like the car’s mileage, service history and if it has had any upgrades or modifications, can also show potential buyers that you’re an honest and trustworthy seller. When setting a price for your car, you could use the above services provided by Carsales and Redbook to help narrow down a price range that you would be happy to accept. As this is a private sale, negotiations can often occur, and you should be prepared for them by knowing the lowest price that you’ll accept. It’s ok to walk away from a potential buyer if you can’t come to an agreement.

Trading in your car while you’re still paying it off

Generally, if you’re trading in a car you still owe money on, it will impact the amount you will receive from the dealer to go towards your next car. This is known as positive or negative equity.

Should I trade in my car if I have positive equity?

If your car’s trade-in value is worth more than the amount you owe on your current car loan, it is known as positive equity. Let’s say you have been making repayments and the current balance of your car loan is $3,000. You take your car into a dealership to trade it in, and the dealer offers you $5,000 for it. What may happen in this situation is the dealer takes your car, pays off the loan and puts that extra $2,000 towards the purchase of your new vehicle, lowering the purchase price of the car and the amount of the new loan.

Should I trade in my car if I have negative equity?

If your car is worth less than the loan amount remaining, this is called negative equity. You may have to pay the difference between your loan balance and the trade-in value at the dealership. For example, if you owe $5,000 on your current car loan and the dealer offers you $3,000 for your car, then you have $2,000 of negative equity. When it comes to making the trade, you may need to pay off the outstanding amount – in this example $2,000 – when making the new car purchase. Alternatively, the dealer may suggest that you roll the negative equity over into the loan for your new car.

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How to get the best trade-in value

If you are planning on trading in your car at a dealership, there are a few things that you can do. Here are six steps to consider:

• Take care of your car: Consider getting it serviced regularly and ensure each service is recorded in the car’s logbook as proof of maintenance.
• Make repairs as necessary: Regular repairs can help keep your car in good shape, however, it may also be worthwhile to weigh up whether the money you’ll spend on repairs is worth the decreased amount you are likely to receive for the car.
• Keep the car clean: When you bring it into the dealership, ensure that both the inside and the outside of the car are clean and well maintained.
• Be prepared to negotiate: The dealer wants to make a profit from your vehicle, so the lower the trade-in value they offer, the more money they could stand to make.
• Look around for the best deal: Consider visiting a few different car dealerships so you can compare what they may be willing to offer.
• Do your research: Knowing how much your car is likely to get on the open market will help you identify if the dealer is offering a fair figure.

You can compare car loans and car insurance with Canstar to find those that offer you the best value for your money.

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