How to Get the Best Offer for Your Trade-In
Vehicle demand, supply and pricing are in a constant state of fluctuation. Currently, it’s a tough time to shop for a used car and even harder if you’re on a tight budget. Used-car prices soared because of the inventory shortage, and despite the promising trends of rising inventory and falling used-car prices, the average price of a pre-owned car remains high. In fact, Cars.com data show average used-car prices in the first half of 2024 were up 34% from the same period in 2019.
Related: What Are the Best Used Cars for $20,000?
If you have a used car to sell, trading it in might make sense in this market. But how do you get the best price for your trade-in? Follow these tips.
1. Learn Your State’s Tax Laws
You need not become an expert in the field, but it pays to know your way around sales tax on vehicle purchases in your state. Some states, like California, charge tax on the full price of the vehicle you’re buying, regardless of any trade-in allowance. Others, like Oregon, charge no tax at all. Most states land in a third bucket, allowing trade-in credit to offset the taxable amount of a vehicle purchase.
That means if you bought a $35,000 new car with a trade-in valued at $8,000, you’d owe sales tax on the net difference, or $27,000. In a state with 7% sales tax, that works out to $1,890. Some states limit how much a trade-in can offset the taxable difference, however, so it’s important to know your state’s policy. (Find your state government’s website.)
In any case, this stacks the cards in favor of trading your old car to the dealership that’s selling you the next one, as opposed to selling the car to a third party. Consider the situation above, where you want to buy a $35,000 new car with a trade-in worth $8,000:
- Scenario No. 1: Trade in your old car. Your trade-in knocks the taxable amount down to $27,000. You pay $1,890 in sales tax (again, at a hypothetical 7%). Assuming $500 in dealer and government fees, your net out-the-door price rings up to $29,390.
- Scenario No. 2: Sell your old car independently. You make $8,000 by selling your car to a third party but pay sales tax on the full amount of your $35,000 purchase. At 7%, that’s $2,450 in taxes. Assuming the same $500 in fees, your net out-the-door price is $29,950.
The second scenario costs $560 more. In states where this plays out, your salesperson almost certainly knows the same math — and he or she may rightly point out that any trade-in valuation to counter your third-party offer need not be exactly equivalent to work out to the same net total. (Note that trade-in valuations aren’t a science; they can vary by hundreds or thousands from one dealership to the next because they’re part of the overall negotiation and may depend on whether the dealer already has anything like your car or thinks he or she can make money on it.) But you can still prompt as high an offer as possible. Even if the dealer insists on “matching” it at a few hundred dollars less, a higher number elevates whatever that match might be. Which brings us to the next step …
2. Get Multiple Offers on Your Old Car
Now that you know your state’s tax laws, it’s time to get the best offer on your vehicle. Check out Cars.com’s Instant Offer and Your Garage tools to get an idea of what your vehicle is worth, and consider where you want to collect offers. (It bears mentioning that if you’re willing to go through the trouble, you’ll almost certainly get the most money by selling your car to a private party — likely more than enough to offset the additional sales taxes in the second scenario above.)
Assuming you want to dispatch Old Faithful with the least hassle, prep your car for sale to a dealership and hit up an established group like CarMax, which can furnish a cash offer that’s good for a week. You should also visit at least one dealership from your car’s particular brand to secure a cash offer; just make sure they know you don’t intend to buy another car in the process. If your car is in decent condition and less than 5 or 6 years old, that dealer may furnish a more attractive offer because it can easily sell your car as a certified pre-owned vehicle. If it’s the same dealer that serviced your car, you might get a better offer still, as its service staff should have a thorough knowledge of the vehicle.
Once you have two or more offers in writing, keep the highest one in your back pocket as negotiating leverage.
3. Leverage the Best Offer — but Only if Needed
With offers on your old car in hand, start shopping for your next vehicle. There’s no need to whip out the offers as soon as your salesperson asks if you plan to trade anything in. Let the dealership conduct its own appraisal and originate an offer on its own; the new offer might very well exceed your third-party offer with no comparisons needed. If it falls short, it’s time to leverage your highest third-party offer, realizing that the dealership may “match” it a few hundred dollars short in states that allow trade-in allowances to offset the taxable total. (If you’re in a California- or Oregon-type situation, such adjustments won’t apply.)
Regardless of specifics, a high third-party offer should prompt a competitive match from the dealer selling you the next car. If it doesn’t, return to the party that offered more, jettison your old car and grab a ride back to the dealership selling you the next one. Depending on the difference, a couple extra hours and an Uber ride is probably worth your trouble.
4. Remember: The Difference Is What Matters
Throughout the whole process, it’s critical to remember that the trade-in allowance is simply a factor that lowers your next vehicle’s net price. That out-the-door total, including all taxes and fees, should remain your primary focus.
The recent inventory shortages might mean you’ll see little movement on the listed price for whatever new, or newer used, car that you’re eyeing. Getting the highest trade-in value is a way to reduce what you’ll eventually owe as much as possible, and it might be the only leverage you’ll have in today’s environment. But it all wraps into the net difference, which matters most — so much so that we negotiate exclusively on it for Cars.com’s long-term Editorial purchases.
Recall the scenarios laid out in Step 1 on a $35,000 new car with a trade-in worth $8,000. With various assumed taxes and fees, the prospective out-the-door total netted to $29,390 in the first scenario. That number (not the $35,000, the $8,000 or any monthly payment amounts) should be the focus of your negotiations. Trade-in value is an important part of the equation.
More From Cars.com:
- How to Sell Your Used Car
- First-Time Buyers: How to Sell Your Car
- How Should I Prep My Car for Sale to a Dealer?
- Common Mistakes When Selling or Trading to a Dealer
- What Are the Best Used Cars for $10,000?
- What Are the Best Used Cars for $15,000?
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