Best Time to Trade In a Car- Tips for Getting the Best Value for Your Used Vehicle
There are a couple of reasons why you may want to trade in your used car. Perhaps it’s time for an upgrade, or it could be you want to cut ties with your mechanic. Whatever your reasons, there’s the best time to trade in a car and other times when you’re better off waiting.
‘Best’ in this context refers to a time when the dealerships will readily accept your auto and offer you ‘top dollar’ for that matter.
One way dealers make money is by low-balling your trade in and then selling it for a nice profit. Like in any other business, no dealerships will want to invest in an auto that will end up sitting on the yard for too long. This implies that they also operate on the philosophy of the most appropriate time to take a trade in. These are the times you should take advantage of if you want to get the most out of your used car.
When is the Best Time to Trade In a Car?
When It’s Low on Mileage
Mileage is a crucial factor when calculating car depreciation. That’s why the odometer readings will be one of the first considerations for the dealer when you turn over your trade in.
Generally speaking, a car with more miles will have a lower resale value than an identical model with lower mileage. This is because, with every mile that your car puts on, there’s more wear and tear happening on crucial components, such as the brake pads, brake discs, tires, and clutch and flywheel. Also, keep in mind that every extra mile that your car clocks up brings the engine closer and closer to its last leg.
Simply put, a high-mileage car has relatively higher chances of experiencing technical issues in the future than a low-mileage one. And this will significantly affect its resale value.
So, how many miles are too many when trading in a car?
Well, car dealers don’t have a direct answer for this question. This is because the level of maintenance also matters a lot. For instance, a daily driver with 100,000 miles and a complete service record may be a better buy than another with 70,000 miles and a wanting maintenance record.
Additionally, a vehicle with higher mileage, mostly from highway driving will attract a better deal than a similar model with fewer miles but primarily used around the city.
Dealership appraisers will easily tell whether you put enough effort to keep the car in good shape by looking at its interior and exterior. So, although a low-mileage car is likely to attract a better value, what matters most is how well you’ve kept it.
At the End of the Year
Consumers are often advised to buy or lease a new car towards the end of the calendar year for a couple of reasons. First, like other salespersons, car sales staff have monthly, quarterly, and yearly quotas to hit. It’s significant for the sales staff to achieve these goals as they come with incremental cash bonuses, also known as spiffs.
If the salespersons are several cars short of their target, they’ll come up with incentives to bring the cost of vehicles down as a way of making more sales. Slashed prices mean that there will be more cars rolling off the yard. This increases the demand for trade-ins at the end of the year, and as the new year starts. That’s also to say that you’ll enjoy tons of savings on your new purchase if you choose to trade in your car for an upgrade around this time of the year.
Another key note to make here is that most auto manufacturers release the next year’s models toward the end of the year. This makes it easy for you to negotiate a better value for your trade in as dealerships tend to be in a hurry to clear old stock.
When You Have Equity on Your Car
In cars and auto loans discussion, equity refers to the difference between how much you owe on your car loan and its current market value. As we’ve mentioned on our other post on how to trade in your car, equity can be positive or negative.
Positive equity means that if you were to sell the car, you’d have some money left after clearing the loan. On the contrary, if you have negative equity, the current value of your car would not be enough to pay off your finance. You may find yourself on the negative equity side (also known as being underwater or upside on your loan) when the car depreciates at a higher rate than you’re repaying the loan.
We recommend trading in your car when you still have equity on it. And the reason is obvious: you can have the extra amount deducted from the negotiated price of your new lease or purchase. If your budget allows you to make a down payment, your new auto loan will be reduced further leading to a lower interest.
Should I trade a car with negative equity?
It’s possible, but we don’t advise doing so. Most car dealerships will be willing to pay off the remaining amount and roll it to your new loan. But this is unwise because it puts you upside down on your new loan immediately. Moreover, you roll off that yard with a much bigger loan than you bought your car for, which implies that you’ll end up paying more interest.
There are times when you may have to take this risk, though: for instance, when you really need a new car but your budget doesn’t allow you to clear the previous loan. If you have to take this route, consider downsizing by going with a cheaper vehicle. This might make your next loan more manageable.
When the Weather is Nice
Perhaps you’ve never thought of this, but there’s the best season to trade in different car models. When the climate outside is pleasant during the spring and summer, more people are likely to flood car yards to look at vehicles listed for sale.
Your convertible is more likely to fetch a reasonable price if you trade it in around these two seasons. As the temperatures rise, so does the demand for spiders (roadsters), classics, and sports cars. If you’re looking forward to trading in your 4×4, SUV, or off-roader, autumn and winter may be the best time to do so.
Of course, the season is not the only thing to be on the lookout for. You also need to adhere to the principle of supply and demand. If you realize that there are, let’s say, 20 Mitsubishi Outlanders listed for sale locally, it might be worth holding off until most of them have been cleared if you want a better price for your trade in.
When Repairs Start Exceeding Your Monthly Repayments
If you’ve been frequenting your mechanic’s auto repair shop of late, perhaps it’s time for a little math. You could be sinking more money into repairs than you’d be spending on another car’s monthly payments.
To determine whether you’re spending too much money on car repairs, you’ll first need to check the current value of your vehicle. You can get an appraisal for your car in 3 minutes at Gettacar. The Kelley Blue Book is another reliable tool for estimating a car’s worth when traded in or sold at a private sale party.
If you figure out that your auto is worth, let’s say, $3000 only, then it’s not economically sensible to spend another similar amount on monthly repairs. Of course, unless there is some sentimental value attached to it.
As your car ages, there are times when your mechanic will give you a list of things that need to be repaired. If you find yourself choosing which problems to be fixed to keep repair costs down, then there will always be issues awaiting to be solved. This is a clear indication that it’s time to trade in your car.
When You’re Under No Pressure to Trade In
Another perfect opportunity to trade in your car is when you’re under no pressure at all to get rid of it. This is the time when you’ve cleared your auto loan (if you had one) and have equity on your car or you’re at par with your monthly repayments. At this time, we’re also assuming that everything- inside and outside the vehicle- is working perfectly and there’s no major service that’s due.
The chief advantage of trading in your car at this point is that you dictate the terms of the trade in deal. If the dealership isn’t offering what you think is the best car trade in value, you can walk away or check with other dealers. No pressure.
Your car is also likely to fetch a good amount at this point. Think of it from the dealership’s perspective. When dealerships accept your trade in, they recondition it by having some repairs and detailing done before selling it for a profit. Most dealers don’t want a car that will require thousands of dollars in repairs. But if they do, they will know how to make up for it on the value of your trade in and the price of your new lease or purchase.
Should I Trade In My Car?
Essentially, the decision to trade in or sell your car privately comes down to effort vs value. You’ll get more money out of your used car if you choose to put it on the market yourself. However, you should be ready to put in the work. If you pick this path, you’ll begin by ensuring that the vehicle is in good condition, which means bringing maintenance up to speed. Potential shoppers will examine the car inside-out and scrutinize everything from service records and accident history to the stain on the seats.
Depending on your car model’s demand, it may take several days, weeks, or months before it gets a buyer. You’ll need to develop a good classified car advertisement and pay to have it on sales websites, such as Craigslist, eBay, and AutoTrader.
After doing this, you’ll need to keep the car clean at all times and be available to offer road tests any time.
Lastly, you’ll be responsible for handling all the legal and contractual processes that appertain selling a car privately. This also means that you’ll be liable in case something goes wrong during the transaction.
Selling a car privately may not be so hard if you’re familiar with the process. However, if you can’t withstand this complexity, you’re better off trading it in.
Trading in your car comes with tons of convenience because most dealerships will take your auto as it is. It pays to have some fluids changed and some detailing work done before turning over your trade in. But you don’t need to mind major repairs.
Plus, trading in your car is super fast and straightforward. This is great if you need another car (or cash) ASAP. Trading in your vehicle also comes with a great deal of sales tax savings. In most states, sales tax is paid on the difference between the value of your old car and the price of the vehicle you’re buying. This benefit only applies if you’re trading in your auto- not selling it privately.
Lastly, the car dealership will take care of the paperwork. You won’t need to invest additional time and money to have your title paperwork processed at your local DMV.
All the convenience that you get when trading in a car comes at a cost. The trade in value for a vehicle may be 10%-20% lower than the market value depending on its demand and current condition. But that’s because the dealerships also need to budget for reconditioning (including mechanical repairs) and make some profit off it.
When Not to Trade In Your Car
Now that you know when to trade in your used car, are there times when you shouldn’t? It turns out there are instances when you should wait:
i) When your car is new
Your new car will have lost about 10% of its value one minute after driving off the lot. In the first year of ownership, the vehicle will depreciate by up to 20%. After the first year, the car will be losing around 10% of its value annually until the 5-year mark. Technically, this means that it will be significantly cheaper to own your new vehicle after the first year.
ii) When you’re upside down on your car loan
If you’re underwater on your car loan, it’s advisable to wait until you clear the loan or you have equity on the car before trading it in. Rolling over the balance onto your new auto loan means that you owe more than the car is worth even before you’ve driven out of the dealership. You’ll still be able to sell the vehicle in the future, but you’ll have lost more money in the form of interest along the way.
How Soon Can You Trade In a Financed Car?
There’s no exact time when you should trade in a financed car, but it makes most sense if you wait for at least one year if the vehicle is new. As mentioned earlier, the car’s value will dip by 20% during the first year and slowly after that. Depending on the size of your down payment and your car’s rate of depreciation, it’s not uncommon to have negative equity on your auto loan almost immediately.