Trade-ins are worth a pretty penny these days, but is that enough of a reason to trade in your car? The answer depends on your situation, but we have some points to consider if you're waiting to get into another vehicle.
3 Reasons to Trade-In Your Car
Now may not be the best time to sit with a vehicle you don't need, can't afford, or just want to be out of! Now is as good a time as any to trade-in. Let's look at why:
- Vehicle values are high. Used car values are running high due to production shortages for new vehicles. This is largely due to a global chip shortage caused by the pandemic. With dealer stock hitting low points, they're eager to get your used car on their lot.
- Used car prices continue to rise. With a shortage of dealer stock also comes the bump in price due to supply and demand. Used car prices are rising, so trading in your vehicle can be a good way to lower the cost of financing. Trade-in equity works as a down payment and is applied to the selling price of your next car. If you want to be out of your car but need to get into another, there's no time like the present, before prices see another jump. According to Experian's State of the Automotive Finance Market Report in the first quarter of 2021, average used car loan amounts rose by $1,032 year-over-year for subprime borrowers.
- Increase odds of auto loan approval. Borrowers with less than perfect credit are often required to bring cash to seal the deal on an auto loan. Most subprime lenders require borrowers to have at least $1,000 or 10% of the vehicle’s selling price down. If you have a decent trade-in with equity, your old car could help you meet this requirement, or even completely satisfy it so you don’t have to bring cold hard cash to the table.
3 Down Payment Benefits
- Trade-in equity counts as a down payment. Whether you’re purchasing a new or used vehicle this time around, there are three major benefits that are worth noting:
- Turning the equity in your car into a down payment lowers the amount you borrow, which decreases the amount of interest you have to pay.
- If there's enough value in your trade-in, you could put yourself in a position to avoid negative equity on your next vehicle.
Adding trade-in value to a down payment you already saved can help you increase how much you put down, which could lower your interest rate, change your loan term, or give you more vehicles to choose from.
What's Your Car Worth?
To find out if your vehicle is worth a pretty penny, you can use online valuation guides such as NADAguides or Kelley Blue Book to get an estimate of what your car could fetch as a trade and a private sale. These figures can vary widely, and you may see more money hit your pockets if you sell it yourself.
Remember that selling a vehicle yourself means doing all the paperwork yourself, being responsible for paying off any loans, and making sure the title gets transferred to the new owner.
If you own your car free and clear, its whole value is equity that you can use, but if you still have an auto loan, you should check to make sure there's equity in your vehicle first. To have equity, your car must be worth more than you owe on your loan. When vehicle values rise, your equity position can change without you having to do a thing!
Ready to Trade-In Your Car Now?
If you're ready to stop waiting and start shopping for your next vehicle, we've got your back at The Car Connection. You can start your search for a vehicle right here, and you can take the next step in the process right here, by filling out our fast, free, auto loan request form.
We'll get you connected to a local dealership that has the subprime lenders necessary to work with borrowers in many types of credit situations, including no credit, bad credit, and even bankruptcy. What are you waiting for? Get started now!