The best advice about trading in your car is to avoid it.
You'll always get more money selling it on your own, sometimes thousands more.
A quick tour of Kelley Blue Book's KBB.com used-car valuation service shows you why. Take a 2010 Honda Accord EX sedan in "very good" condition with 50,000 miles on the odometer and see what it is worth.
Kelley says that the trade-in value is $13,054 and that it would sell to a private party for $14,549. That's a $1,500 difference, but the gap could be bigger because many dealers don't offer the full Kelley Blue Book trade-in value. They try to buy at low wholesale and sell at the top retail price.
Trading in a car also complicates the purchase of a new car, giving the dealer an opening to inject more profit into the deal by low-balling your car. It's also much easier for a buyer to negotiate one transaction — a car purchase — rather than adding a second transaction into the deal.
But we understand some people don't want the hassle of selling a car themselves. It means advertising the vehicle, letting strangers drive it, negotiating the price and sometimes accepting thousands in cash. If the car is expensive, you might have to wait for a buyer to get a loan. There's also transfer paperwork to handle.
So if you're going to trade in your car, take some basic steps to ensure you get a fair deal.
First, nail down the price for your new car before discussing the price for your trade.
Many dealers prefer to negotiate both prices at the same time, leaving them an opening to play the deals off each other. If you insist on getting more for your trade — or simply a fair price — the dealer may try to charge you more for the new car. Or vice versa: If you insist on a great deal for the new car, they'll try to knock down your trade-in price.
You're under no obligation to tell the dealer you have a trade until you've agreed on the new-car price. If they ask, simply insist that you won't talk about the price of the trade-in until you've come to terms on the new purchase.
As you negotiate this part of the transaction, you need to start with solid information about what your old car is worth.
The easiest way to do this is to take it to the nearest CarMax used-car dealer. CarMax is the biggest seller of used cars in the U.S. and has more than 120 stores spread nationwide. The company will evaluate your car for free and make you an offer that is good for seven days. It will also identify any major problems that could hurt your car's value.
Use the CarMax price as the lower limit for what you will accept from the dealer. It also gives you a second potential buyer. If the dealer insists on low-balling you, you can always just sell the car to CarMax.
Kelley Blue Book also offers an online service where you can get "instant" offers for your car from dealers. It doesn't always generate an offer, but it will provide you with a list of dealers that might be interested in buying your car even if you don't plan to purchase a new vehicle from them.
If you can't get a satisfactory price from either CarMax or the dealer, you can always return to the option of selling it to a private buyer — at a retail price, instead of wholesale. If you're determined to sell it quickly, price it below retail cars of the same model and year, but still above what CarMax offered. It should get snapped up.