When Should You Trade In Your Car

You might be excited for a new vehicle—but when should you trade in your car? Here’s what the experts say.
Written by Bonnie Stinson
Reviewed by Carrie Adkins
Financially speaking, it could be the right time to trade in your old car for a newer model if its value is greater than the amount you owe on the loan. Maybe you want room for more passengers, more cargo space, or perhaps you just want a faster ride. These are all good reasons to consider a trade-in, which can help knock down the price of a new vehicle.
Trading in a car is a convenient way to get a new vehicle quickly. However, it won’t maximize your profit. Even so, there are a few smart ways that car owners can offset this slight loss. 
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Factors to consider before trading in your car

Life circumstances might require that you get a new car, but there are other factors that you should also consider. Here are a few things to evaluate when making your decision on whether to trade-in your car.


Besides the condition, mileage is one of the first factors a buyer considers. It’s true that every 10,000 miles leads to a slight decrease in value, but don’t get too worked up about finding a magic number. The condition of your vehicle and its maintenance history are far more important than its mileage.

Vehicle age and loan repayment

Newer is better, obviously! There is a five-year window from its original purchase date during which you’ll get the best trade-in prices. Between five and eight years old, there’s not much reason to rush as studies show a very slow decrease in value in this period. 

Loan status

Consider your loan status. If you have a lengthy repayment term (like 72 months or longer), you may end up owing more on the loan than the vehicle is currently worth. This is called being
upside down
or underwater. If you trade in for a new vehicle, you’ll still be underwater. Try to trade your current vehicle when its value is greater than the amount you still owe.

Time of year

New cars are a big deal around the holidays and end-of-year sales. What this means for you is that your old trade-in will be less in-demand during those months. Experts recommend that you aim to do your trade-in during the first two quarters of the year when values are highest for used vehicles. 
There’s a hidden psychological reason for this strategy, too. A 2020 model feels less old earlier in the calendar year than later (i.e. January vs. December 2021). Knowing this can help you net a higher trade-in value.

Your own timeline

If you need a new vehicle soon—perhaps more seats for a growing family or storage capacity for a new hobby—then you may need to trade ASAP. Don’t nickel and dime yourself out of an urgent change. Yes, you may lose a few hundred (or even thousands of dollars) if you can’t be flexible, but sometimes you need to do what’s right for your own circumstances.
Key Takeaway: Try to trade earlier in the year and consider your car’s mileage after age five, your loan status, and of course when trading in will be best for you.

When should you wait to trade in your car?

It may feel urgent, but there are some seriously good reasons to delay a trade-in. Here are a few that could make a big difference.

Prepayment penalties

If you’re still making payments on your car, trading it in could incur prepayment penalties. Review your loan contract carefully to find out if your lender will demand this fee. Usually, you won’t be hit with this penalty if the loan term is longer than 60 months. 

You recently bought the vehicle

How often should you trade your car in? Whenever it’s profitable to you. 
When you buy a car, you end up paying more than just the price tag. You’ve also got to pay for sales tax, warranty,
gap insurance
, and more. So, if you recently spent money on these items for your current vehicle, you may be needlessly duplicating costs if you trade in.

You owe more than it’s worth

New cars depreciate rapidly. If your monthly payments are quite small, you may face a situation where your vehicle is worth less than the amount you owe on your loan. This is called being underwater on your loan. In this case, a trade-in won’t actually lower the cost of buying a new vehicle since you still owe more money than your old car’s trade-in value.
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Should I sell or trade in my car?

If you’re not sure whether to trade in, you still have some other options. You can sell it to a private party, for example. Here are the pros and cons of each approach.

Sell to a private party

The best advantage of this strategy is that you’ll probably make more money. Private buyers and sellers can negotiate prices closer to the market value, whereas dealers need a little room in the price so they can resell it for a profit.
Be aware that selling to a private party can be a bit more time-consuming. You have to write the listing, take good photos, handle emails, go for test drives, and manage the paperwork. If time is of the essence, this may not be the best choice for you.

Trade it in to a dealer

If you want a quick and hassle-free process, this is the way to go. You don’t have to advertise or negotiate with potential buyers. Instead, just bring your vehicle to the dealership and let their team assess its value. 
There is a notable disadvantage, however. Dealers will offer you slightly less money on the sale, since they need to make a profit. For some people, the slight reduction in profit is worth the convenience. However, sellers who need to get the most money may prefer a private-party deal.

Trading in your car and down payments

When you trade in a vehicle, it may not cover the entire down payment cost for the new vehicle. You can offer a combination of trade-in value and cash, if you like. The more money you can put down, the lower the interest rates you can achieve. Of course, always be sure to set aside an emergency fund and remember to budget for other vehicle ownership costs (insurance, gas, maintenance).

What types of vehicles hold their value the best when trading in?

Some makes and models hold their value better than others. Subaru and Porsche top the list in addition to popular vehicles like the Honda CR-V and Toyota Tundra and Tacoma. Generally speaking, SUVs and specialty vehicles hold their value better than family sedans. 
Here is a list by category:
  • Best full-size SUV: GMC Yukon
  • Best compact SUV: Subaru Forester
  • Best subcompact SUV: Subaru Crosstrek
  • Best compact car: Subaru Impreza
  • Best midsize car: Subaru Legacy
  • Best hybrid car: Toyota Prius Prime
  • Best minivan: Honda Odyssey
  • Best midsize pickup truck: Toyota Tacoma
  • Best full-size pickup truck: Toyota Tundra

Make sure your credit is ready for a big purchase

A trade-in may seem straightforward, but your credit score has a big impact on the finances involved. A big down payment can help you unlock low interest rates, but a great credit score can help with this, too. 
You can check your credit score before you head to the dealership. This is a soft credit check so it won’t impact your rating. Pull it yourself for free from a site like
or AnnualCreditReport.com. Knowing your credit score can help you negotiate better with lenders.
If your credit score isn’t great, there’s still hope. Improving your credit is easy but it does take time. Start by getting bills in your own name, paying them off promptly, clearing debt, and showing responsibility. You can always apply with a co-signer who has better credit.
Key Takeaway: If you can be flexible, you’ll get the best price if you can wait to trade-in your vehicle until 1) you have great credit and 2) it’s between January and June.

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A new car depreciates quickly. Your best window for a trade-in is within the first five years. Between five and eight years, there’s not much difference in trade-in values.
Each strategy has its advantages and disadvantages. Selling to a private party could net you a higher profit but it’s more time-consuming. Trading it into a dealer could mean a lesser profit but way less hassle.
The first two quarters of the year (January through June) are the best months to sell your car.
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