When Should You Trade In Your Car?

When to Trade In Your Car

If you need a new vehicle right away, you may not have the luxury of timing your trade-in perfectly. But if you have some flexibility, certain circumstances can signal that it's a smart time to make the switch.

You Have Positive Equity

Equity is the difference between your car's current market value and the amount you still owe on your auto loan. If your car is worth more than your loan balance, that could be a good time to trade in.

Positive equity means the trade-in value can be applied directly toward your next vehicle, reducing how much you need to borrow. This can lower your monthly payment and help you avoid starting your new loan with negative equity (also called being underwater).

To find out where you stand, check your car's value using a tool like Kelley Blue Book and compare it to your remaining loan balance. If the numbers work in your favor, trading in could be a financially sound move.

Your Repair and Maintenance Costs Are Expected to Rise

As vehicles age, they tend to require more frequent and expensive repairs. If your car is approaching a mileage milestone, such as 100,000 miles, or you're noticing more mechanical issues, you may want to consider trading it in before those costs add up.

Major repairs like transmission replacements, engine work or suspension overhauls can cost thousands of dollars. If you're facing a repair bill that rivals or exceeds your car's value, putting that money toward a newer vehicle often makes more sense.

Your Warranty Is Ending or Has Ended

Many manufacturer warranties cover major repairs for the first three years or 36,000 miles, with powertrain coverage often extending to five years or 60,000 miles. Once your warranty expires, you're responsible for the full cost of any repairs.

If your warranty is ending soon and you're concerned about potential out-of-pocket expenses, trading in while the car still has some coverage—or shortly after—can help you transition to a new vehicle before costly problems arise.

You're in a Time Crunch

Selling a car privately takes time. You'll need to create listings, respond to inquiries, schedule test drives and negotiate with potential buyers. If you need to replace your vehicle quickly, trading in at a dealership is far more efficient.

Dealerships handle most of the paperwork and can often complete the entire transaction in a single visit. If convenience and speed are priorities, trading in is usually the better route.

Your Car's Model Year Feels Outdated

A vehicle's model year plays a role in its trade-in value. New models typically roll out in the late summer or early fall, which can make your current car feel a year older even if the calendar hasn't changed yet. This can be especially true if the next model year features a major redesign.

If you're planning to trade in, doing so before the newest model hits dealerships can help you avoid an additional year of depreciation.

Learn more: How Much Do Cars Depreciate Per Year?

When Should You Wait to Trade In Your Car?

Trading in a vehicle can be a smart move, but it's not always the right choice. In some situations, waiting or exploring other options may serve you better.

You Have Prepayment Penalties

Some auto lenders charge a fee if you pay off your loan early. While prepayment penalties aren't allowed on loans longer than 61 months, many states permit them on shorter-term loans.

Before trading in a car you're still financing, review your loan agreement to see if an early payoff fee applies. If it does, factor that cost into your decision.

You Recently Purchased the Car

Buying a car involves more than just the sticker price. You'll also pay sales tax, registration fees and potentially add-ons like extended warranties or gap protection. If you trade in a vehicle you recently purchased, you'll incur many of those costs again on your next car.

Frequently trading in vehicles you haven't owned for long can become expensive. If you find yourself in this pattern, leasing might be a more cost-effective alternative.

You Owe More Than It's Worth

If you bought your car new with little or no down payment, rapid depreciation during the first year or two may have left you underwater—meaning you owe more than the car is currently worth.

In this situation, trading in won't reduce the cost of your next vehicle. Instead, you'll either need to pay the lender the difference out of pocket or roll the negative equity into your new loan, which increases your borrowing costs and raises the risk of being underwater again.

Learn more: How to Trade In a Car With an Upside-Down Loan

What Types of Vehicles Hold Their Value the Best Upon Trade-In?

Not all vehicles depreciate at the same rate. Some brands and models are known for retaining their value better than others, which can make a significant difference when it's time to trade in.

According to Kelley Blue Book's 2025 Best Resale Value Awards, the average new vehicle retains about 45% of its original value after five years. However, the top-performing vehicles average nearly 58%. Toyota earned the Best Resale Value Brand title for the eighth time in nine years, with Lexus winning for luxury vehicles.

Here are some of the top vehicles for resale value by category, according to Kelley Blue Book:

5-Year Resale Value by Vehicle Category

Source: Kelley Blue Book

Trading In Your Car and Down Payments

A vehicle trade-in can serve as all or part of your down payment on a new car. Like a cash down payment, a trade-in reduces the amount you need to finance, which lowers your loan balance and monthly payment.

You can also combine a trade-in with cash for a larger down payment. The more you put down, the less you'll need to borrow. What's more, a larger down payment may even help you qualify for a lower interest rate.

That said, be careful not to deplete your savings entirely. Maintaining an emergency fund is important, so make sure any cash you put toward a down payment doesn't leave you financially vulnerable.

If you qualify for a very low interest rate, you might also consider whether investing that extra cash could provide a better return than putting it toward the car. The right approach depends on your financial situation and goals.

Should I Trade In My Car or Sell It?

When it's time to part ways with your vehicle, you have two main options: trade it in at a dealership or sell it to a private party. Neither option is universally better, however, and the right choice ultimately depends on your priorities and circumstances.

When to Consider Trading In Your Car

Trading in is often the better choice when convenience matters more than maximizing your sale price. Here are some scenarios where a trade-in makes sense:

• You value convenience over top dollar. Dealerships handle the paperwork and can complete the transaction quickly, often in a single visit.
• You want to reduce sales tax. In many states, when you trade in a vehicle, you only pay sales tax on the difference between the new car's price and your trade-in value. This can result in meaningful savings.
• You're still making payments. Trading in a financed car is more straightforward than selling privately, since the dealer can pay off your loan directly and apply any remaining equity to your purchase.
• You need a replacement vehicle immediately. If your current car is unreliable or you're in a time crunch, trading in allows you to drive away in a new vehicle the same day.
• You don't want to deal with strangers. Selling privately means fielding phone calls, scheduling test drives and negotiating with buyers. Trading in eliminates that hassle, but consider the fact that the dealership likely won't pay as much for your car as a private buyer would.

When to Consider Selling Your Car

Selling to a private party typically nets you more money, but it requires more effort. A private sale may be the better route if:

• Your car is in excellent condition. Vehicles that are well-maintained and have low mileage are more likely to command higher prices from private buyers than what dealers typically offer.
• You own the car outright. Without a loan to pay off, selling privately is simpler: You receive the full sale price directly.
• You have time to wait for the right buyer. Private sales can take weeks or even months. If you're not in a rush, you can hold out for a better offer.
• Your vehicle is in high demand. Popular models or cars with desirable features may attract more interest from private buyers willing to pay a premium.
• You're comfortable negotiating. Private sales often involve back-and-forth on price. If you're confident in your negotiation skills, you may be able to secure a higher sale price.

To compare your options, use a valuation tool like Kelley Blue Book to check both the trade-in value and the private-party value for your vehicle.

How to Prepare Your Car to Be Traded In

First impressions matter when you bring your car to a dealership. Taking some time to prepare your vehicle can help you get a better offer.

• Clean it thoroughly inside and out. Wash and wax the exterior, vacuum the interior and wipe down all surfaces. A clean car tells a buyer that it's been well cared for.
• Address minor cosmetic issues. Small fixes like touching up paint chips, replacing worn floor mats or cleaning stained upholstery can improve the car's overall appearance.
• Check the tires and brakes. Worn tires or squeaky brakes can give dealers a reason to lower their offer. If replacements are needed, consider whether the cost is worth the potential increase in trade-in value.
• Gather your maintenance records. Documentation showing regular oil changes, tire rotations and other services demonstrates that the car has been properly maintained.
• Locate the title and registration. Having your paperwork ready speeds up the process and shows you're a serious seller.
• Remove personal belongings. Clear out the glove compartment, trunk and any storage areas. Don't forget to remove items like garage door openers or toll transponders.
• Know your car's value. Research your vehicle's trade-in value ahead of time using resources like Kelley Blue Book. Going in informed gives you leverage to negotiate.

Frequently Asked Questions

The Bottom Line

Trading in your car can be a convenient way to offset the cost of your next vehicle, but timing and preparation matter. By understanding when to trade in—and when to wait—you can make a decision that aligns with your financial goals.

Before heading to the dealership, it's also worth checking your credit. Your credit score plays a significant role in the interest rate you'll qualify for on an auto loan, which affects your monthly payment and the total cost of financing.

You can check your credit report and FICO^® Score^Θ for free through Experian to see where you stand. If your credit needs work, taking steps to improve it before applying for a loan could save you money over the life of your financing.