Should I Sell or Trade in My Paid-Off Car?

Did you buy your current car several years ago? It may have fit your needs perfectly back then, but you could benefit from an upgrade now that your family has grown or you’ve had a career change. Trading in or selling your car is a great way to fund a hefty down payment for a new vehicle. It’s very common to upgrade a paid-off car rather than drive it into the ground. Learn how trade-ins work and how the process compares to selling your vehicle to a private buyer.

Trading in Your Car to a Dealership

If your car is paid off, you’re in a good position to trade it in. You can then use the trade-in value to lower the cost of a new or used car from the same dealership. To get the most from your trade-in, do everything you can to increase your car’s value first. This includes cleaning it inside and out, fixing cosmetic damage, and getting it serviced.

Remember, almost everything about buying a car is negotiable, including the value of your trade-in. Seek estimates from multiple dealerships, whether they sell your car’s brand or not, to help you get the highest value possible. Most trade-in offers are good for about a week, giving you time to compare options.

Know that you can still trade in your car, even if it’s not paid off. You simply need to bring the loan balance down to zero by paying a lump sum. This removes the lien from the title and allows you to sell the car without issue. The money from your trade-in may be enough to pay off your auto loan. If not, you’ll need to pay the difference out of pocket.

Because cars depreciate over time, they may have negative equity at some point, meaning they’re worth less than the outstanding loan balance. This is most likely to occur with newer cars, which depreciate more quickly than older cars.

It’s okay to trade in a car with negative equity. Just be aware that the dealer may add the difference to your new auto loan, deduct the amount from your down payment, or both. In either case, you can expect higher monthly payments. To avoid this, you can always postpone your purchase or pay down your loan faster before trading in your vehicle for a new one.

Trading in vs. Selling

You can always sell your car privately instead of trading it in to a dealership. Consider the pros and cons of these options to help you decide what’s best for your situation.

Trading in Your Car

• Pro – Less hassle, more peace of mind: When you work with a reputable dealer, you can expect a smooth, easy process. Simply bring your car in, get a fair value, and automatically put the trade-in equity toward your next purchase.
• Pro – Reduced sales tax: In many states, including Wisconsin, the trade-in value of your car is not subject to sales tax, so you only pay taxes on the final ticket price. This means a trade-in valued at $8,000 is not taxed at the Wisconsin sales tax rate of 5 percent, saving you $400 in taxes. This benefit is only available if you trade in your car.
• Pro – Improved car loan eligibility: Whether your car is paid off or not, trade-in equity can fund the down payment you need to qualify for an auto loan. This is particularly useful for helping bad-credit borrowers meet loan eligibility requirements.
• Con – Lower offer: Car dealerships want to profit when they sell your trade-in, so you may receive a lower offer than you could get if you sold your car privately.

Selling Your Car

• Pro – Higher sale price: A car’s private party value can be thousands of dollars higher than its trade-in value. Look up these estimates on Kelley Blue Book to learn what you can expect.
• Con – More time and effort: Selling your car to a private buyer involves listing it for sale, waiting for offers, and handling the paperwork yourself. This typically means making yourself available for test drives, drafting a bill of sale, signing titles, visiting the bank, and transferring ownership at the DMV. You’ll also likely have to fend off scammers throughout the process. If you’re not prepared to take these steps, selling your car privately may be more hassle than it’s worth.

Trade in Your Car at V&H Auto

The trustworthy team at V&H Auto is happy to work with drivers who have negative equity, positive equity, or fully paid-off cars. Our finance center will work with you to value your trade-in and help you decide between buying new, buying used, or leasing your next car. Visit our Ford auto dealer in Marshfield, WI, or call (715) 387-2545 for more information.

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