Q: What is Trade-In Value?

December 17, 2013 12:53 PM

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Your existing vehicle doesn't lose all of its value simply because you've chosen to purchase another new or used car from a car dealer. In fact, your existing vehicle may have what's known as "trade-in value" with the dealer, based on the market value of the automobile, which can significantly lower the price of your new purchase.

The trade-in value of a car is the amount of credit that a car dealer is willing to offer you toward the purchase price of a new or used car in exchange for ownership of your old car. Depending on the quality of the vehicle that you're using as a trade-in, the savings can be in the thousands. The lower overall price also means a lower car payment if you're financing the purchase.

The trade-in value of the car is based on the market price for that specific vehicle. This market price may be difficult to determine unless your vehicle happens to be in pristine condition. If yours is the rare automobile that has managed to make it to the trade-in stage without damage or work needed, then the trade-in value should be slightly less than the Kelley Blue Book Value for your automobile.

The Kelley Blue Book Value is a price listed for a particular automobile make and model by the largest automotive valuation company in the U.S. In the pages of the book, each listed automobile is appraised, and its market value is given. The values listed are for undamaged vehicles that do not need repairs and represent the best price a seller is likely to get for such a vehicle if it is sold directly to a consumer.

Most trade-ins are unlikely to receive the Blue Book Value even if they're in perfect condition, because that price would leave no room for the dealer to profit from the resale. In addition, few used cars are in the condition needed to qualify for the full market price. In exchange for avoiding the headaches that go with having to sell the car to a private party, the owner of the trade-in will receive an offer that's below the car's actual resale value, minus any estimated repair costs, allowing the dealer to repair and resell the vehicle at a profit.

The trade-in value for most vehicles is negotiable. However, the buyer should know a few things before taking the trade-in vehicle into the dealer for appraisal.

In order to get the best trade-in value possible, the vehicle should look its best. A cleaned and detailed car will get you more at trade-in than one that looks worn and badly maintained. You should also make any minor repairs to the car that you can. Fixing any windshield damage or minor engine issues before an appraisal by the dealer can net you hundreds more on your car's trade-in value.

The trade-in value that you receive for your old vehicle can equal instant savings off the purchase of a new car. Using a trade-in, you can lower monthly payments on a financed automobile, apply the value of the trade-in to a more luxurious model, or simply add a few more options to the car you want to purchase. Whatever your choice, the trade-in value of your existing vehicle is a good way to rid yourself of an unwanted car without the time commitment or expense involved in finding a buyer on your own.

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