Trading in an old car was once the Achilles' heel of car buying, exposing owners to lowball offers and complicated negotiations. But happily, the process now can be more lucrative and user-friendly. From up-front price quotes to guaranteed trade-in values to car-buying consultants who handle the entire transaction via the Web, dealers are providing smoother transitions between your old car and your new one.
Shoppers love the convenience of trading in, since it completes all auto-related chores in one dealership visit. They avoid the headache of selling their old car and, as a bonus, the dealer handles all the DMV paperwork. And in some states, trading in can provide a break in sales tax. Our article, "What New Car Fees Should You Pay?" explains this in more detail.
But what if you were offered less than you expected for your car? Your best bet is to sell it yourself, but that takes time and perhaps more effort than you had in mind. Here are a few alternatives to trading in your used car at the dealership.
Before you begin exploring trade-in alternatives, you should have a baseline figure on what your car is worth. A good starting point to assess that worth is to use the Edmunds used-car appraisal tool. Also, check online classified ads and find cars comparable to the one you want to trade in. This helps establish your car's current value. Remember that trade-in prices are lower than private-party and dealer retail prices.
Here's a round-up of trade-in alternatives for consumers. We ranked them in alphabetical order:
AutoTrader's Instant Trade-In Offer: Long known for used-car classifieds, the AutoTrader Web site now offers to appraise your trade-in, give you an up-front price and connect you with dealers. Input a few details about the car and then a few minutes later, you'll get an e-mail with an estimated value. The site lists dealers who will either give you a check for your car or a value for trading it in on a new car. Restrictions apply, but it does present a stated price that might give you a greater sense of confidence before you go to a dealership.
Make sure you honestly answer the questions about the car's condition level, because the offer is subject to change when the participating dealership sees the car. While it is nice to get an instant offer, the "instant" part only applies to the e-mail you get: It actually takes longer at the dealership than a typical trade-in appraisal. This is because the dealership will conduct its usual inspection and then has to input its findings in the AutoTrader tool to verify the figures.
AutoNation Direct: AutoNation Direct is the online arm of AutoNation, the country's largest auto dealership chain. One of its car-buying consultants will appraise your car based on your description of its condition and other factors, such as mileage, and give you an up-front price. This removes the negotiating that car buyers dread. The entire transaction can be concluded at the car buyer's home or office, including the trade-in. Here's more about AutoNation Direct's pricing system.
It's important to understand that AutoNation Direct isn't trying to distinguish itself by offering the best trade-in prices, says Simon Smith, its national sales director. The main benefit is what Smith calls a "protected buying experience" that is free from negotiating pressure. While Edmunds.com hasn't itself used the AutoNation Direct trade-in process, many car shoppers give the service high marks.
CarMax: This used-car superstore has more than 100 outlets in 27 states and promises, "We'll buy your car even if you don't buy ours." Edmunds has used this service many times when selling long-term test cars and we've often been pleasantly surprised at the high prices CarMax has offered. Sometimes the used-car chain offers us less than we expected, but it at least gives us a guaranteed back-up plan and we can decide whether it is worth our time to try and improve on the offer. As one CarMax salesman once told us, "Our checks don't bounce."
Inspection takes about 30 minutes and the trade-in offer is good for seven days. Some customers have found that the best way to dispose of their old cars is to negotiate a deal for a new car elsewhere, then sell their old one to CarMax, where the prices are typically better than at a traditional dealership. Another effective strategy is to get the CarMax estimate and list the vehicle for about $1,000 over the CarMax offer in a free online classified. If the vehicle doesn't sell in six days, you can take it back to CarMax and sell it there before the offer expires.
Factory Trade-In Programs: These alternatives are really for a future trade-in, not the current one. If you buy a new Subaru or Tesla, the car comes with a guaranteed trade-in price. For example, Subaru's Guaranteed Trade-In Program states how much a Subaru dealer will give you for the car when you bring it back later as a trade-in. For some, this removes the doubt about the impact of depreciation. The buyers can, in a sense, see into the future and know what their new car will be worth as a trade-in. This trade-in price is available for six years.
If you finance your Model S electric vehicle purchase with Tesla (admittedly, a small pool of people), the company guarantees that the car will have "the top residual value of any high-volume premium sedan brand (Audi, BMW, Mercedes or Lexus)" after three years of ownership. Buyers will get a "resale value guarantee" letter shortly after they purchase the vehicle, according to Tesla. The method to calculate the value and to cash in the offer is somewhat complicated and is outlined on the Tesla Web site.