Why trade-in?
Trading
in your current vehicle towards another can partially offset the cost of
the new vehicle. The trade-in's net value goes towards the purchase or
lease of a new car. Conditions of a trade-in vary depending on who owns
the vehicle.
If you own the vehicle, trading-in means
that you're selling the car to the dealer for some determined price. As a
result, the price of the new car goes down, only.
If
you are leasing a vehicle and do not own it, trading-in means that the
seller of the new car agrees to pay the outstanding costs associated
with the lease. Depending on the financing of the new vehicle and the
outstanding balance on the old one, trading-in can either raise or lower
the new car's price.
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Why is it beneficial to trade-in?
When you trade-in you don't have to worry about selling the
vehicle yourself or any of the associated costs (advertising, showing
the car, etc). A dealer may offer a price you could not get yourself as
an incentive to purchase a new vehicle. If the trade-in has known
problems that could plague you later (when the buyer returns
complaining), selling the car to the dealer eliminates the bother.
Trading-in a lease car may relieve you of, in the long run, monthly
costs you cannot afford. Sometimes people trade in lease vehicles
because of poor gas mileage or lack of practicality.
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Why decide against trading-in?
If you think you can get a better price selling privately, and
it's worth the time, money and effort, do not sell to the dealer. Some
cars are of special interest and dealers will not always recognize those
interests.
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What happens to a trade-in?
Some are kept by the dealer and resold as used cars. Many are
sent to auction and purchased by other dealers for resale. Dealers know
that auction prices often will not match the sum credited toward a new
vehicle, but they absorb the losses as sales incentives.
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How much can I expect to get?
Check used car values in guides issued by organizations such as
Edmunds.com or the National Automobile Dealers Association (NADA).
Often both trade-in and private sale values are listed. Factors such as
mileage, overall condition, damage and known mechanical problems heavily
influence the trade-in value.
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