How to Sell a Car That Has a Loan [5 Options]
When you’re purchasing a new car, you’ll need to decide what to do with your old one.
Many people end up trading in their vehicles, which means they essentially sell them to the dealer they’re buying the new car from. This is convenient because you don’t have to worry about finding a private buyer and the money from your trade-in can automatically be deducted from the cost of your new car (which could help you save on sales tax).
But dealers don’t always pay top dollar for vehicles. If you’re going to sell your old car to the dealer you’re buying your new one from, these techniques can help you figure out how to get the most for your trade-in.
In this article
- How to get the most from your trade-in
- Other ways to save when you buy a car
- Bottom line
How to get the most from your trade-in
To make sure you’re being offered the best price for your trade-in vehicle, it helps to educate yourself on what your car is actually worth.
Fortunately, many websites will allow you to estimate fair market value. Using them before you go to the dealer and getting an idea of your car’s objective “worth” can be an invaluable step in maximizing your trade-in value.
Knowing your car’s valuation can give you a good idea of what a fair offer is, and you can use the online numbers as negotiating leverage if a dealer lowballs you. Remember, though, as Kelley Blue Book explains, it’s unlikely that you will get the full market value for your trade-in because dealers need to be able to resell it at a profit.
There are multiple websites you can check to see how much your car is likely worth. They include:
- Kelley Blue Book
Knowing what your car is worth is just the first step, though. Here are a few other strategies that could help you get the most for your trade-in.
Clean your car thoroughly
It’s a good idea to give your car a good cleaning inside and out before taking it to a dealer to discuss its trade-in value. This can include washing and waxing the interior, removing all personal items, and detailing the inside by shampooing the carpets and using ionizers to eliminate odors.
These cosmetic details are important for a few reasons. First, a clean car is going to make a better impression than a dirty one. And that initial impression dealers form of your vehicle may factor into what they ultimately offer for your trade-in.
Second, and perhaps more important, is that the cleanliness of your car is often seen as a good indicator of how well it was maintained. If you bring in a filthy car full of garbage and dirt, the dealer may surmise that you don’t take very good care of your possessions. This can lead them to believe you weren’t great about maintaining the car, which could increase the risk of underlying mechanical issues.
Cleaning your car doesn’t take much time or money if you do it yourself. Even having it professionally washed and detailed shouldn’t cost too much if you aren’t up for a DIY job. Taking these steps could land you a higher price for your trade-in.
Fix any minor cosmetic issues
Does your car have foggy headlamps, minor dents, scratches and dings, or worn-out wipers? These and other cosmetic issues can also affect a vehicle’s condition and your ability to get the best trade-in offer.
Furthermore, cars are often classified as being in excellent, good, fair, or poor condition when the vehicle’s valuation is set. Even minor observable flaws such as a bit of rust or some slight body damage can take a car from excellent to good or good to fair.
Often, you’ll end up better off in the end if you spend a few hundred dollars to make sure your vehicle is in tip-top shape so dealers will consider it immediately ready for resale and be more likely to offer a great price.
Don’t put off basic maintenance
Taking care of car maintenance tasks like oil changes can be a hassle under the best of circumstances. If you know you’re going to be trading in your car soon, you may not want to be bothered by completing these tasks.
Unfortunately, if your car has deferred maintenance, dealers will take notice. And they’ll likely offer you less for it — not just because they have to take care of the upkeep you neglected but also because failing to maintain a car properly can cause underlying mechanical problems.
A dealer might not want to buy a car if the oil change is way overdue, for example, because not changing the oil can cause engine damage. The dealer could be afraid they’ll end up facing major repairs before they can resell the car, or may worry they’ll be accused of selling a lemon if they buy your car and resell it with major problems.
Instead of risking your car’s value by putting off basic routine maintenance tasks, get these all done on schedule and keep detailed records you can provide to dealers. These records could help increase your trade-in value by showing that you were serious about maintaining the vehicle’s good condition.
If you have any open recalls, it’s also important to get them taken care of before you trade in the car. Otherwise, dealers may lower their offer because they will have to work with the manufacturer to get the fix made before reselling it.
Consider a private sale
If your goal is to get the most money possible by selling your vehicle, trading it in to a dealer isn’t necessarily the right way to go. Instead, you might be better off selling the car to a private party.
There’s a simple reason for that: A private buyer isn’t going to try to turn around and immediately resell the car for a profit. As a result, they might be willing to pay closer to the fair market value because they aren’t going to need to find someone else who will pay more for it.
Of course, there is hassle involved in a private sale. You’ll need to market the vehicle, meet with potential buyers, arrange a way for them to test drive the vehicle, and take care of all of the paperwork involved in transferring ownership.
If you’re considering a private sale, it’s also important to understand that you may not end up with as much extra money as you expect. That’s because most states have a quirky rule surrounding sales tax.
In most places in the U.S., you will pay sales tax on a vehicle you buy. But the amount of tax you owe is based on the difference between the price of the new car and the value of the trade-in. So if you buy a $20,000 car and have a $10,000 trade-in, you will pay sales tax on only $10,000. If you instead sold your car to a private buyer and bought your $20,000 vehicle, you’d pay sales tax on the entire $20,000.
The difference in the amount of sales tax you owe might not be enough to fully offset the reduction in price that comes from trading in your vehicle to a dealer versus selling it to a private buyer. But it does go a long way toward making up the difference, especially when you consider the hassle involved in arranging a private sale.
Other ways to save when you buy a car
Figuring out how to get the most for your trade-in can help you save on the cost of purchasing a new vehicle, but it’s not the only money-saving technique to try. In fact, there are a number of other steps you should take to try to keep more money in your pocket.
Negotiate car price
Today, a growing number of companies offer no-haggle pricing, which means they simply offer the best price they are willing to sell the vehicle for. If you work with one of these dealerships, you can expect to pay the sticker price.
However, most traditional car dealerships are still built around a pricing model where it’s customary for the dealer and car buyer to negotiate the car’s price. At these dealerships, car dealers put a suggested price on the vehicle but they might not expect buyers to pay it. The car is marked up, and buyers who can effectively negotiate may be able to save considerably over the advertised cost.
Because this is the business model, you don’t want to just go in and accept the offered price. If you do, you’ll likely end up paying more than the car is actually worth given the fact the dealer priced the vehicle with the expectations of negotiating. To negotiate effectively:
- Determine the vehicle’s market value by using the same websites mentioned above to estimate your trade-in’s worth
- Contact several dealers to get a range of prices. You can use each dealer’s quote as leverage to try to get other salespeople to beat it.
- Make an offer you believe is fair, based on your review of the car’s market value and the prices dealers offered you. Leave yourself some wiggle room to accept a counteroffer.
- Avoid discussing monthly payments, rather than the car’s total price. Dealers can make cars look less expensive by stretching out the payoff time for your car loan.
- Take your time and don’t rush into buying a vehicle. This will give you more opportunity to search for the best deal and more leverage as car dealers don’t want you to walk off the lot.
- Negotiate on all aspects of the sale, including the vehicle’s cost, features, and services included, and the financing rate you’re offered.
- Read the fine print carefully and get the out-the-door number so you’ll know all of the total costs you’ll incur and can compare apples-to-apples from different dealers.
The more prepared you are going into this process, the better the chance you’ll be able to buy a car at a good price.
Shop around for insurance
When you buy a new vehicle, you’ll need insurance for it. The costs of car ownership include not just the price of the vehicle, but also the insurance that you’re required to have in order to drive it.
Insurance prices can vary considerably from one company to the next, so it’s a good idea to compare car insurance quotes before you buy a policy.
By getting personalized quotes for the coverage you need, you can find the insurer offering you the very best price on your policy. The best car insurance companies often offer no-obligation online quotes, so it’s easy to compare prices from several insurers to get a good deal.
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Buy a used car instead of a new car
New cars always cost much more money than used cars. And they lose value immediately upon leaving the lot because they are no longer new anymore. When you buy a used car, the original owner has taken the biggest hit from the vehicle’s depreciation. Of course, if you do decide to buy a used car, you’ll want to research its history to ensure it hasn’t been in accidents or had any major issues.
You’ll also typically pay less for insurance for a used car than a new one, in most cases. This can help add to the savings this strategy provides.
How much mileage should your car have when you trade it in?
The specific amount of mileage your car should have when you trade it in depends on your goals.
Lower mileage cars have higher trade-in values for a few reasons. First, it’s assumed they’ll last longer; and second, the cars may still have their original factory warranty, depending on their total mileage. As a result, if you hope to trade in your vehicle before its value drops considerably, lower mileage is best.
On the other hand, some people prefer to drive their car into the ground, which means they keep the vehicle as long as possible until it no longer runs effectively or needs repairs that aren’t worth paying for. This can ultimately be better for your finances because you won’t have to pay for a new car as often.
Which cars retain their value best?
Kelley Blue Book awards Best Resale Value awards to vehicles that tend to retain their value more than others. Toyotas and Subarus are among the top car brands with many vehicles that depreciate less than the average car. However, ultimately, how you care for your vehicle can have just as big an impact on your car’s trade-in value as the brand you pick.
Is it worth trading your car in to a dealership?
You will generally not receive as much money for your vehicle if you trade it in to a dealership rather than selling it privately. However, there’s a lot less time and stress involved with trading it in. In most states, you also save on sales tax by trading your car in because you pay only the tax on the difference between the price of the new car and the trade-in value.
Ultimately, you’ll need to decide whether you’re comfortable going through the process of finding a private buyer or if you’d rather accept less for your current vehicle in exchange for the convenience of simply taking it to a dealer.
Trading in your car might not get you the best price. After all, if dealers are going to make a profit, they can’t pay you the car’s full market value. But by cleaning your car, maintaining it properly, and making sure you research its value before going to the dealer, you should be able to maximize the dealer’s offer.
You may decide that the amount the dealer is willing to pay is good enough, given the fact that simply trading in your car can be a lot less stressful than finding a buyer yourself. Ultimately, you’ll need to consider your goals and decide whether you value your time more than the extra money you might get by selling your car privately versus selling to a dealer.
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