2. “Everything You Need to Know About Trading In Your Car”

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How Does Trading In a Car Work?

Trading in your car allows you to hand over your old vehicle and drive away with a new one from the dealership. This process can simplify your car purchase and save you the time and effort of selling your car privately. According to a recent Cars.com survey, 44% of car shoppers plan to trade in their vehicle for this convenience.

However, the trade-in process has its nuances. Here’s how to trade in your car to get the best value.

How Do Car Dealerships Determine Trade-In Value?

Several factors influence your car’s trade-in value, including:

• Mileage
• Age
• Supply and demand in the local market
• Time of year
• Equipment
• Condition

Different dealers use various formulas to calculate trade-in prices. It’s wise to shop around for the best trade-in value. Remember, the trade-in value is negotiable, so don’t hesitate to visit multiple dealerships.

Trading In a Car With a Remaining Loan Balance

If you still owe money on your car loan, consider whether your loan balance is higher or lower than your car’s value. This is known as “negative equity” (owing more than the car’s worth) or “positive equity” (owing less than the car’s worth).

With positive equity, you can apply the difference between your car’s value and what you owe toward your new purchase, reducing your overall cost. For example, if your car is worth $20,000 and you owe $12,000, you have $8,000 in positive equity to use as a down payment.

With negative equity, the dealer typically pays off your loan and adds the difference to your new car loan. If you owe $20,000 but your car is worth $12,000, the $8,000 difference is added to your new loan. In some cases, selling your car privately might be a better option to eliminate negative equity.

How to Trade In a Car

Follow these steps to maximize your trade-in value:

1. Research Your Car’s Value: Use websites like Kelley Blue Book, J.D. Power, and TrueCar to find your car’s value. Get quotes from dealerships and online retailers like CarMax and Carvana.
2. Prepare Your Car: Clean and detail your car, and make minor repairs if necessary. A well-maintained car can fetch a higher price.
3. Make an Appointment at the Dealership: Schedule an appointment to save time and understand the valuation process better.
4. Negotiate the Trade-In Separately: Focus on negotiating the trade-in value separately from the new car purchase to avoid financial maneuvering by the dealer.

Pros of Trading In Your Car

You May Save Time: Trading in your car at the dealership while purchasing a new one is faster and simpler than selling it privately.

The Dealer Pays Off Your Loan: The dealer can pay off your remaining loan balance and use any positive equity as a down payment.

You May Save on Sales Tax: Most states allow you to deduct your car’s trade-in value from the new car’s purchase price, reducing your sales tax.

Cons of Trading In Your Car

You’ll Get Less for Your Car: Dealers aim to make a profit, so you’ll likely receive a lower trade-in offer than selling privately.

It Can Complicate Negotiations: Dealers may bundle the trade-in value, new car price, and loan terms into one negotiation point, complicating the process.

What Do You Need to Trade In Your Car?

To trade in your car, you’ll need:

• Your driver’s license
• Your car’s title and registration
• Proof of insurance
• Trade-in offers and estimates
• Maintenance records
• Keys and remotes
• Ownership manual

If you have a loan on your car, be prepared to show your account number and loan payoff amount.

Does Trading In a Car Impact Your Credit?

Trading in a car itself doesn’t impact your credit, but the credit check and new loan might. A new credit inquiry can temporarily lower your credit score, and closing your current loan could shorten your credit history.

Maintaining a good credit score can save you money on your loan. Check your credit report and score before heading to the dealership. If needed, take steps to improve your credit to secure a better interest rate.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you with all your mortgage needs!

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