When it’s time to sell a car, owners have several options. Money Crashers explained that some try to sell it themselves. They’ll put up a sign and spread the word within their inner circle. That way, they can negotiate the deal and choose the person who the car will be sold to. They can also sell it by putting up ads in the newspaper or on websites like Craigslist. This will cast a wider net and could potentially draw in more buyers.
The other choices owners have is to take their car to a dealer to trade it in. This option might not get them the best deal, though it is by far the easiest. The deal can be made and the car owner can drive off in a new car that day. Plus, the car’s value will go directly toward the purchase of the new car. Even though this choice is fast and simple, it can still be a complicated path and there are several terms car owners should be familiar with before trading in their car.
Here are 3 terms that we think are a must know before going to trade in your car.
The best place to start when preparing to exchange your car for another is learning how much money you can actually get for it. There are several ways to determine your trade-in value, Bankrate said. Kelley Blue Book and Edmunds.com are two online resources that can help. Stopping into a nearby DriveTime is another alternative, if you want your car appraised in person. DriveTime will offer a value, which you can accept or double check against elsewhere. Another way to assess how much your car may be worth is to compare it to similar used cars being sold currently. You may be able to find a comparable car on Craigslist or eBay. Check how much that car is being sold for and how well it’s doing and how long it has been for sale.
Upside Down and Underwater
Once you determine how much you can get for your car, you will need to evaluate how much you still owe on the car. If your trade-in value is more than the remainder of your auto loan, you’re in good shape. However, if you owe more than your car’s value, you’re considered “upside down” or “underwater,” according to Kelley Blue Book.
To find out how much you are underwater by, subtract the value of the car from the amount you owe. If you choose to sell the car to a dealership, you will have to pay the store this difference, says Edmunds.com. However, there are other opportunities for auto sellers as well. Kelley Blue Book explained upside down auto owners can bring it to a dealership to trade in if they’re willing to pay the difference, or they can even sell it themselves. You will get less than the car’s value, but you will come out ready for a new car. This time, though, research your auto loan options and car values to make sure you don’t wind up underwater again.
Most states let car buyers pay sales tax on the difference between the car you traded in and the one you bought, according to Bankrate. Only seven states, plus the District of Columbia don’t allow this practice. However, if you live in one of the states that does, this tax advantage could save you several hundred dollars, depending on the value of the car, according to Real Car Tips. Edmunds.com advised those hoping to utilize this benefit to keep the negotiation of the trade-in separate from the purchase of the new car. Keeping them separate will help to determine the amount you actually have to pay sales tax on.
Trading in a car can be a quick way to get rid of your old car and find a new one. However, it’s important to know how the process works, and how you can make the most of it. By learning what these terms mean, you will be more than prepared for trading in your car.
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