Articles & Tips

Trade-In Options for Your Used Car

Trade-In Options for Your Used Car

Trading in an old car was once the Achilles’ heel of car buying, exposing owners to lowball offers and complicated negotiations. But happily, the process now can be more lucrative and user-friendly. From up-front price quotes to guaranteed trade-in values to car-buying consultants who handle the entire transaction via the Web, dealers are providing smoother transitions between your old car and your new one.

Shoppers love the convenience of trading in, since it completes all auto-related chores in one dealership visit. They avoid the headache of selling their old car and, as a bonus, the dealer handles all the DMV paperwork. And in some states, trading in provides a break in sales tax. See this article to learn more.

The downside: Shoppers often get less than their trade-in is worth. Worse still, the trade-in obscures the real price of the new car and leads to game-playing by dealers who, in extreme cases, sometimes instruct their salesmen to “steal the trade.” Our story, “Confessions of a Car Salesman”, describes how a newbie sales guy learned to present grossly undervalued prices to his customers by lying about what cars were selling for at auto auctions.

A trend toward a kinder, fairer trade-in process comes from a variety of factors, but it partly boils down to supply and demand.

“Dealers have been increasingly desperate for trade-ins, as new-car inventories are tight and used prices have sustained at elevated levels,” says Jessica Caldwell, Edmunds.com’s director of pricing and industry analysis. That’s expected to be the trend for the immediate future, she says.

Before you begin exploring trade-in alternatives, keep in mind that your old car has real value — no matter what a dealer might say. A good starting point to assess that worth is to use Edmunds’ True Market Value (TMV)® used-car appraisal tool. Also, check online classified ads and find cars comparable to the one you want to trade in. This helps establish your car’s current value. Remember that trade-in prices are lower than private-party and dealer retail prices.

Here’s a round-up of trade-in alternatives for consumers:

Autotrader.com: Long known for used-car classifieds, the Autotrader Web site now offers to appraise your trade-in, give you an up-front price and connect you with dealers. The site lists dealers who will either give you a check for your car or a value for trading it in on a new car. Restrictions apply, but it does present a stated price that might give some people a greater sense of confidence before they go to a dealership. We did a partial test-drive of the service by entering information about an Edmunds.com long-term vehicle, a 2010 Volkswagen GTI with 24,000 miles. The Edmunds.com TMV trade-in price was $17,400 and the offer from Autotrader was actually more — $17,700.

AutoNation Direct: AutoNation Direct is the online arm of AutoNation, the country’s largest auto dealership chain. One of its car-buying consultants will appraise your car based on your description of its condition and other factors, such as mileage, and give you an up-front price. This removes the negotiating that car buyers dread. The entire transaction can be concluded at the car buyer’s home or office, including the trade-in. For more about AutoNation Direct’s pricing system, see this article.

It’s important to understand that AutoNation Direct isn’t trying to distinguish itself by offering the best prices, says Simon Smith, its national sales director. The main benefit is what Smith calls a “protected buying experience” that is free from the pressure of negotiating with a salesman. While Edmunds.com hasn’t used the AutoNation Direct trade-in process, many consumers give the service high marks.

CarMax: The used-car superstore, CarMax has more than 100 outlets in 27 states and promises, “We’ll buy your car even if you don’t buy ours.” Edmunds has used this service many times when selling long-term test cars and we’ve often been pleasantly surprised at the high prices CarMax has offered. Inspection takes 30 minutes and the trade-in offer is good for seven days. Some consumers have found that the best way to dispose of their old car is to negotiate a deal for a new car elsewhere, then sell their old one to CarMax, where the prices are better than at a traditional dealership. Another effective strategy is to get the CarMax estimate and list the vehicle for about $1,000 over the CarMax offer on a free online classified. If the vehicle doesn’t sell in six days, you can take it back to CarMax and sell it there before the offer expires.

Hyundai and Subaru Trade-In Guarantees: This alternative is really for a future trade-in, not the current one. If you buy a new Hyundai or Subaru, the car comes with a guaranteed trade-in price. For example, Hyundai’s Assurance Trade-in Guarantee states what a Hyundai dealer will give you for the car when you bring it back later as a trade-in. For some, this removes the doubt about the impact of depreciation. The buyers can, in a sense, see into the future and know what their new car will be worth as a trade-in.

“Depreciation is the single highest cost of car ownership,” John Krafcik, president and CEO of Hyundai Motor America, said when the company introduced the program earlier this year. “While Hyundai’s depreciation is now among the lowest in the industry, Assurance will remove many of the barriers and concerns about vehicle ownership.”

Subaru has been doing the same thing since 2009. Its cars come with its Guaranteed Trade-In Program, which sets the amount owners will receive for their car as a trade-in when they purchase a new Subaru. This trade-in price is available for six years.