Introduction

Trading in your car can be a convenient way to sell your current vehicle and purchase a new one simultaneously. However, it’s not always the best financial decision. In this guide, we’ll explore when it makes sense to trade in your car and when you might want to consider other options. At O1ne Mortgage, we aim to provide you with the best advice to make informed decisions. For any mortgage service needs, call us at 213-732-3074.

When Should You Trade In Your Car?

There are several scenarios where trading in your car can be beneficial:

You Have Good Equity

If your vehicle is worth significantly more than your remaining loan amount, you can use the equity to reduce the cost of your new vehicle. In some cases, you might even receive a portion of the proceeds in cash.

You Have Low Mileage

Vehicles with lower mileage tend to retain their value better. Experts often recommend trading in a car before its factory warranty expires, typically around 36,000 to 60,000 miles. Additionally, cars with less than 100,000 miles are generally more appealing to buyers, which can result in a higher trade-in value.

You Have a High Credit Score

A high credit score can help you secure better interest rates on your new auto loan. If you have excellent credit, trading in your car and financing a new one can be a financially sound decision.

You Have a Large Down Payment

If you owe more on your car than it’s worth, trading it in might not be the best option. However, if you have a substantial down payment to offset the negative equity, it could still make sense to trade in your vehicle.

When Should You Not Trade In Your Car?

There are also situations where trading in your car might not be the best choice:

You Have Negative Equity

Negative equity means you owe more on your car than its current value. Trading in a car with negative equity can result in the deficiency amount being added to your new loan, putting you in a precarious financial position.

Your Credit Could Use Improvement

Your credit score affects the interest rate you’ll receive on your new auto loan. If your credit score is in the mid-600s or lower, consider improving your credit before trading in your car.

You Want More Money for Your Car

While trading in your car is convenient, you won’t get as much money as you would from a private-party sale. Private buyers don’t need to resell the car for a profit, so they can offer you more money.

Should You Sell Your Car or Trade It In?

The decision to sell your car or trade it in depends on several factors. Selling your car privately will generally yield more money, but the process can be time-consuming and stressful. Trading in your car is quicker and more convenient, but you’ll likely receive less money.

Consider your personal preferences, available time, and use tools like Kelley Blue Book to determine your car’s trade-in and private-party values. This information will help you make an informed decision.

How to Trade In a Car

If you decide to trade in your car, follow these steps to ensure you get the best deal:

Find Out How Much Your Car Is Worth

Use Kelley Blue Book or a similar service to get an idea of your car’s trade-in value. This will provide a starting point for negotiations.

Get the Car Ready

A clean car will usually fetch a better offer. Consider fixing any minor issues and checking for recalls.

Get Offers from Multiple Dealers

Shop around to get the best initial offer. Use these offers to negotiate with your preferred dealer.

Be Prepared to Negotiate

Bring your car in for an inspection and negotiate the price. Have your service records on hand and be ready to walk away if necessary.

The Bottom Line

Trading in your car can be a convenient option, but it’s not always the best financial decision. Take the time to consider your situation and research all your options. At O1ne Mortgage, we’re here to help you make informed decisions. For any mortgage service needs, call us at 213-732-3074.