Just as shoppers are always looking for the best time to buy a car, the same “lifehack” philosophy is often applied toward their trade-in. As a general rule, you’re going to get less trading in your car than selling it yourself. The dealership has to factor in reconditioning and making a profit on the vehicle. A number of factors also affect the trade-in price. Being aware of some of these can help you set expectations for the price you’re offered at the dealership
Best mileage level for a trade-in
Some people keep one eye on their odometer at all times, trying not to put too many miles on their car so they won’t hurt its value when the time comes to trade it in. But your car’s mileage may not matter as much as you think.
Sure, the value of your car drops slightly with every 10,000 miles you add. But according to Edmunds data, there is no major drop-off at any certain milestone. Even the 100,000-mile mark is not a value-killer as long as the car is in good shape. The truth is, there is no magic number. And dealers are already flush with low-mileage used cars that have come off leases, so they’re not in a rush to add more to their lots.
What matters more is the model year. If your car is only a few years from new, it is likely to retain 60%, or even up to 70%, of its original value. That remains true even if you racked up the miles. Cars that are 5 years old or older, however, are less likely to reach those figures whether they were babied or not. Still, if your car is in good shape, it will retain value — dealers can often resell older vehicles much more quickly than newer ones. But when it comes to getting the most money for your trade-in, newer is better.
Best month/time of year to trade in
Buyers often focus on the best time of year to buy a new car, whether it’s around holiday discounts or end-of-year clearances. Trade-ins can be an afterthought in this line of thinking.
But there actually is a good time to trade in a car. Values are higher in the first two quarters of the year, with larger drops in the final two quarters. Obviously, the longer you have a car, the more it will depreciate. But there are other valid reasons that keep values afloat early in the year.
First of all, there are more buyers in the market early in the year and dealerships need more cars to feed the demand. Also, a used car feels more new when it is eight or 10 months away from turning a model year older rather than just two or four months away. These are good things to keep in mind when you’re looking to either time your trade-in or negotiate with a salesperson in March instead of October.
Best age of the car to trade in
Again, newer is better. Your car will hold more value the more recent its model year. As with mileage figures, there typically isn’t one particular age when a car’s value plummets. It will decline gradually but steadily. But by the time it’s about 5 years old, its residual value has likely dropped significantly.
When it’s between five to seven years past its model year, the decline in its value slows and mostly settles. So if you didn’t trade in during the first five years of ownership, there’s not much reason to rush to do it before the car turns 8. You’ll get about the same amount of money back as long as the mileage doesn’t skyrocket, so consider taking that extra time to build your savings for a down payment on something you really want.
Best point in the loan to trade in
If you took out a loan to buy the car, the best time to trade it in is a subjective decision that will differ for each person. But there is, objectively, a worst time.
We do not recommend trading in your vehicle if you still have a balance on the loan and have not yet earned any equity. This means you still owe more money than the car is actually worth and are underwater on the loan. With the average length of car loans increasing in recent years, this scenario is becoming more and more common. Learn more by reading our article on how to deal with underwater loans. If you trade in the vehicle for another at this point, you’ll be underwater on that loan too, exacerbating the problem.
Instead, reach out to your creditor to find out how much you owe on the loan. Compare that to the estimated value of your car on a trade-in, and when its value is higher than the amount you owe, consider that a green light. Now you’ll have something to put toward buying a new vehicle. But it will be up to you to decide when you can get the most return, keeping in mind that your car declines in value with each passing year and each additional mile.
What vehicles do best/worst as a trade-in?
It’s difficult to predict what will happen in the used car market as the world recovers from the coronavirus pandemic. But certain trends are likely to hold true. Generally, you can count on the following:
- SUVs keep their value better than sedans.
- The Toyota Tundra and Tacoma are the two best vehicles at holding residual value.
- Specialized vehicles, such as Jeep off-roaders or Porsche sports cars, perform better than most.
- Popular in-demand vehicles such as the Honda CR-V and Toyota RAV4 do well.
These are typically among the leaders at holding value because they are considered more rare, more reliable or long-lasting, or easier to resell than the average vehicle. Some, such as Jeeps, Porsches and Tundras, check all three boxes.
SUVs outperform sedans because they are seen as more durable and more practical. That said, compact and midsize sedans hold their value well compared with most electric vehicles and expensive luxury cars.
And of course, a car that’s in good shape will command a larger sum than one with multiple repairs and chipped paint. The best thing you can do for your car’s value is take care of it.