Trade-In Terms You Should Know When Looking for a Car

Posted by DuGood Federal Credit Union on March 2, 2021

Blog-Auto-Trading-TermsWhen purchasing a car, you could be faced with many different scenarios. One of which is trading in your current vehicle for a newer one. Using those trade-in funds to pay for a newer car can certainly make owning your dream car more affordable. However, when moving through the trade-in process, there are a few terms you should know to ensure you’re communicating effectively and negotiating confidently for the best deal possible.

TIP: Before starting this process, find out what the fair market value would be for your trade-in.  This way, you’ll know if the dealership is offering you a fair offer or not.

Ok, let’s get started...

Trade-In Value:

This is the value in which the dealer is usually willing to pay for the specific make and model of your car. A few factors can influence this value such as the overall condition, mileage, age, and the current demand for your specific vehicle.

Trade-In Retail Value:

The retail value is the price a dealership can expect to get from selling your old trade-in. Depending on the condition, it may require some work, so that cost is also rolled into this price. Trading-in your car to a dealership is a pretty simple process, but you might not get as much money as you think. However, selling the car privately will require more effort as you have to list it and get it into sellable shape yourself.

Trade-In Allowance:

When you’ve settled on a trade-in value with the dealership, an allowance should be made so that once it’s time to purchase a new car, the dealer will reduce the retail price to accommodate the price of your old trade-in vehicle.

Negative Equity:

If you owe more than your trade-in vehicle is worth, you might be facing a negative equity situation. It’s also referred to as being "upside-down" or "underwater." If you find that you have negative equity, waiting to pay down the car until you have positive equity can make a trade-in work better on your behalf. If you decide to move forward, depending on the deal that’s made, it could put you in a tough financial position.

A Rollover:

If you decide to trade-in a vehicle with negative equity, a dealer will offer to "rollover" the debt you owe into a new car loan. This means, the loan amount will need to be higher to accommodate your new car and your outstanding debt. Make sure to review all the terms of a new loan of this nature before signing. This is not recommended because it puts you further in debit and will make you upside down in the new loan.

How DuGood can Help

Now that you know all the top "trade-in" terms, you’re ready to get out there and make a deal! DuGood has a variety of resources to help you along the way. Check out our EZ Auto Buying Tool that provides available inventory from local dealers, financial calculators and more.

Research and compare with EZ Auto Buying.

Be sure to get pre-approved before you shop so you’ll know exactly what you can spend, giving you more negotiating power.

Get pre-approved now.

You’ll find DuGood’s auto rates and financing options are the best around! If you have any questions about your trade in or new vehicle, our auto loan professionals will be happy to answer any questions and help you get a loan that fits your needs. Stop by any branch or give us a call at (409) 241-2248.


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