Today, we’re going to break down each of those different variables and answer a few common questions about financing, trade-in’s and more …
Of all the options of what to do with an old car, trade-in is not the worst. However, you may be able to get more when you sell. Going through the hassle of shopping a car around is time-consuming a headache though.
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How Does Trading in a Car Work? Can You Trade in a Car for a Cheaper Car?
On the most basic level, trading in your car is pretty simple. You decide on the new car you want, the dealer will look at the Kelley Blue Book Trade in Value of your car, and the value of your current car will be subtracted from the amount you owe on the deal.
So if you price your car out at $20,000 and you want to trade in for a new car with a sticker price of $20,000, it’s a straight auto trade. If you still owe money on a loan for the first vehicle, that amount will be “rolled over” and you’ll need a new loan to cover the difference.
What About Trading a Vehicle with Negative Equity?
When you have “Negative Equity,” it means the value of your car is less than the amount you owe on its loan. So, for example, if your car note is $22,000 on that car that’s worth $20,000, you’ve got $2,000 of negative equity that will need to be reconciled when you go to trade in. This is what people are referring to when they say you’re “upside down” on a loan, because you owe more than the asset is even worth. One instance of when this might happen is when you want to trade in a car with a blown engine.
You can choose to pay this difference out of pocket if you’re trading in for a new vehicle, or you could attempt to roll the negative equity into a new loan. With smaller amounts (in this case just $2,000), lenders will probably roll it over, but not with larger amounts.
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What About “Surrendering a Car?”
Surrendering your car is another matter entirely, and is much different than a trade-in. Surrendering a car is effectively the same thing as having it repossessed; you’re saying that you can no longer afford to make loan payments and you’re giving them the car to cover some of the remaining loan costs. You’ll still be held liable for any negative equity or the difference between the car’s sale price and what you still owe.
When is the Best Time to Trade in a Car?
Technically, “never.” Cars never really appreciate in value, so it’s not like there’s a perfect time to sell a car and capture the “peak value” unless you’re dealing with a collectible or pristine vintage car. Thus, it makes sense to drive your car for as many miles as possible until you absolutely feel compelled to trade in or upgrade. If you’re trying to trade in a car with problems, though, it could be a different story.
You might decide to trade in for a cheaper car if it’s a more economical choice, or if you need a larger vehicle for practical purposes (trading in an old sports car for a new family van, for example). Additionally, you can keep an eye on the Kelley’s Blue Book value of your car and sell it just as the value starts to drop rapidly. And if you're in Great Britain looking for cheap cars, you can check online about the cheapest new cars in the UK.
What About Trading in a Damaged or Junk Car?
It can be extremely difficult to trade in a car that’s got major damage, serious mechanical/electrical issues, or won’t run reliably. Unless you’re trading it in for a substantially more expensive new purchase, major dealerships generally aren’t going to do you any favors. And private buyers are likely to be few and far between as well.
Your quickest solution for getting rid of junk cars at a decent price is to use our online pricing tool, where you can connect with a nationwide network of approved junk car buyers who will eagerly pay good money for your car regardless of age, condition or mileage.
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