Are you thinking of upgrading your car or downsizing? Trading in your current vehicle can be a smart move. However, did you know that the timing of your trade-in can impact the value you receive? Don’t worry; we’ve got you covered! This comprehensive article will explore the factors determining the best timing for trading in a car and provide insights to help you make an informed decision.
When Should You Trade In Your Car?
As the auto industry evolves, various factors influence the ideal time to trade in your car. One significant factor is the current market condition. Since the onset of the pandemic, used car prices in the U.S. have surged by 152% since March 2020, according to the U.S. Bureau of Labor Statistics, making it an opportune time to cash in on the rising value of your used car.
According to Edmunds.com, the first two quarters of the year are generally the best time to trade in a car. This is attributed to higher values and a larger pool of buyers in the market during the beginning of the year. Dealerships often require more used car inventory in the first half, making them more willing to offer attractive trade-in deals. It’s important to note that a new model year release can decrease the value of your used car, so trading it in well before the new model debuts can maximize its trade-in value.
What’s the Best Mileage to Trade in a Car?
Determining the optimal mileage range for trading in a car is crucial in maximizing its trade-in value. Typically, the best mileage range for trading in a car is between 30,000 and 40,000 miles or between two and three years old. Trading in your car before the factory warranties expire can increase its trade-in appraisal. Buyers and dealers consider lower mileage and more remaining warranties as indicators of a well-maintained vehicle.
To decide the best time to trade in your car from a mileage standpoint, consider the following milestones:
- Before factory warranties expire: Trading in your car before the warranties expire ensures potential buyers can benefit from the remaining warranty coverage, making it a more attractive option.
- Before major service intervals: Timing your trade-in before major service intervals can help you avoid costly maintenance and repairs, enhancing the trade-in value.
- Before reaching 100,000 miles: While some cars can be traded in after reaching 100,000 miles, trading it in before this milestone is generally more advantageous, as higher mileage can negatively impact the trade-in value.
How Long Should You Keep a Financed Car Before Trading It In?
While you can trade in a financed car at any point, waiting until you’ve paid down enough of the loan is advisable to have positive equity. Positive equity means that the trade-in value of your car exceeds the amount you owe on the loan.
Credit.org offers a helpful chart that illustrates the relationship between the number of years you’ve owned the car, its original price, and maintenance costs. This chart can assist you in determining the most opportune time to trade in your car while minimizing financial risks.
When You Really Shouldn’t Trade In Your Car
While trading in your car can be advantageous in many cases, there are situations where it may not be the best option. Consider the following factors before deciding to trade in your vehicle:
- Your Car Is New: Trading in a new car often results in significant depreciation, making it less financially beneficial. It’s advisable to hold onto a new car for a few years to mitigate the impact of depreciation.
- You’re Upside Down on a Car Loan: Being “upside down” means you owe more on the car loan than the car’s current value. In this scenario, trading in your car may result in negative equity, meaning you’ll have to pay off the remaining loan balance even after trading it in.
- Your Credit Score Has Dipped: If your credit score has declined since you purchased the car, it may negatively impact the financing terms and interest rates on a new loan. Considering the potential impact on your financial situation before trading in your car is crucial.
- Your Loan Has Prepayment Penalties: Some car loans have prepayment penalties, which can significantly increase the cost of trading in your car. Be aware of any penalties associated with paying off your loan early.
Conclusion
Timing is crucial when it comes to trading in a car. You can maximize the value you receive by understanding the best time to trade in and considering factors such as the time of year, mileage, and loan equity. However, it is important to weigh the pros and cons and evaluate your unique circumstances before deciding.
Trading in your car can be a smart financial move, but there are better options for some. By considering the information provided in this article, you can make an informed decision that aligns with your goals and financial situation. Remember to consult with a trusted automotive professional or financial advisor for personalized advice tailored to your specific needs.
FAQs
Can I trade in a financed car?
Yes, you can trade in a financed car at any point. However, it is advisable to wait until you’ve paid down enough of the loan to have positive equity when you trade it in. Positive equity means that the trade-in value of your car exceeds the amount you owe on the loan, resulting in a more favorable financial outcome.
Is it always better to trade in a car?
While trading in a car can be convenient, it’s not always the best choice. Factors such as negative equity, a new car’s depreciation, or prepayment penalties on your loan can make trading in your car less financially beneficial. Consider alternatives like selling your car privately or exploring refinancing options before deciding.
Can I trade in my car if I still owe money on it?
Yes, you can trade in a car even if you still owe money on it. However, it’s essential to consider your loan balance and the potential for negative equity. Suppose the trade-in value is lower than the amount you owe. In that case, you may have to pay off the remaining balance separately, either upfront or rolled into a new loan.
Can I trade in a leased car?
Yes, you can trade in a leased car before the lease term ends. However, there are some considerations to keep in mind. Trading in a leased car early may result in additional fees or penalties specified in your lease agreement. It’s advisable to review the terms of your lease and consult with the leasing company to understand the financial implications before making a decision.