Trade-In Pros and Cons

Trading in your vehicle to a dealer has one primary advantage over selling it yourself: it's much simpler. Instead of listing a for-sale ad, taking time to meet potential buyers and worrying if someone's check is going to clear, consumers who decide to trade in their car simply come to a pricing agreement with a dealer. That's really about it.

But trading in a vehicle involves some issues to consider. The biggest trade-off is the likely possibility of receiving less money in a trade with a dealer than in a private sale. A dealer may be more willing to take a less-than-perfect car off your hands, but he's not going to do it at a premium. When you sell it yourself, you invest more time in the process, but you usually get rewarded with a bit of extra money.

Otherwise, the same general rules apply to trading in your old vehicle as to selling it on your own. First, know what the vehicle is worth. Check out the wholesale value that dealers are paying for that model, along with the retail price.

Dealers obtain the used vehicles they sell from two main sources — trade-ins from customers like you, and at auction. While it's difficult to know what dealers are paying for trade-ins, you can find out what wholesale price they are paying at auction. The most common reference guides are Kelley Blue Book and the National Automobile Dealers Association's Appraisal Guides. The Kelley Blue Book and the NADA Appraisal Guides are available in bookstores and in the reference section of most libraries. They include domestic and foreign vehicles that are 10 years old or newer. Take copies of the prices you find while researching to the dealer to show that you know what the car is worth.

Kelley Blue Book features prices on used vehicles from 1984 through the present model year. Cars.com's Kelley Blue Book tool is updated constantly and takes into account mileage, vehicle condition and factory extras of vehicles that have sold as recently as last week.

Just as you would prepare your car to sell to a private buyer, make sure your old car is clean inside and out before you shop it around to dealers. Know its condition — its strong points and its weak ones. Once you're at the dealership, push the virtues of your product, such as the optional equipment and accessories, its desirability in the marketplace, and any brand recommendations and awards by used-car guides or magazines. Don't mention its defects — let the dealer point those out, but don't deny or lie about them either. Know the cost of required repairs, and remind the dealer that it will cost him less to make repairs than it would you.

Beware of two extremes on trade-ins at dealerships — a really high trade-in value and a really low one. When you are offered an extremely high trade-in value for your vehicle, which will be used against the purchase of your new car, it means the dealer plans to cover the loss on the used car by putting a higher price on the new one. On the flip side, a rock-bottom price on your trade-in suggests that you're getting a low price on the new vehicle.

In the end, you may be able to negotiate a fair trade-in price that's less than the amount you'd get selling it on your own but is higher than the dealer's original offer. By eliminating all the hassle involved with selling the vehicle on your own, trading it in may be worthwhile. That's for you to decide.

© Cars.com 8/1/12