Trading In a Car with Problems - What to Expect
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Trading In a Car with Problems - What to Expect

By Zac Estrada | February 9, 2021

Trading in your vehicle to a dealership is an easy way to help fund the purchase of a new car and a one-stop way to offload an old one. But what if that older car has cosmetic or mechanical problems, or regular upkeep hasn't been performed? None of that might prevent a dealer from taking in a vehicle as a trade, provided certain factors are considered before doing the deal.

Why Should You Trade in Your Car?

Most car dealers allow trade-ins. That is, they purchase your older vehicle to help cover the cost of the one you're buying from them. Trade-ins are especially helpful for people who have a car to swap in exchange for extra cash or use as a down payment. The trade-in value is usually dependent on the type of car and the brand, color, equipment, mileage, condition, and even geographic region. Sites such as KBB.com (Kelley Blue Book) and Edmunds offer trade-in value estimates based on these factors.

Trade-ins are a great way to get an old car off your hands, and they sometimes cover the entire down payment of a new car purchase. Trade-ins can lower the amount you pay each month if you take out a car loan. It can also lead to potential tax savings on any profit made from essentially selling your old car to the dealer.

Trading in a Problem Car: How It Works

When you arrange to trade in a car, the dealer usually inspects it for damage and deducts the cost of any necessary repairs from your car's value. Minor repairs may pass unmentioned, but major repairs could make or break the whole deal. You should always be upfront about your car's problems when trading it in because dealers sometimes make less generous offers if they discover problems independently. Suppose your vehicle has major collision damage that might require repairs that exceed a vehicle's value. In that case, a dealer is very unlikely to take a gamble on it. But minor body damage, such as missing or broken trim and some light scratches, are easily repaired and are unlikely to hurt the value too much. Some mechanical and engine problems are negotiable because the dealer can often do these jobs on their own. The dealer can also turn around and sell the vehicle to an auction house, leaving those repair issues someone else's to fix. Suppose your car has electrical problems, such as faulty door locks or a battery that dies at random. In that case, the dealer may accept the vehicle depending on the severity of the problem. Dealers like to recondition cars they get through trade-ins if they plan to put them on their used car lots. That's especially the case with low-mileage cars or relatively new models with only one or two previous owners.

Before going in, get an idea of the vehicle's trade-in value and some of the costs of making the necessary repairs. Edmunds, Kelley Blue Book, and the National Automobile Dealers Association, among other car evaluation resources, feature online appraisal tools to make valuing a vehicle easier. The tools let you include the car's condition for a more accurate figure. However, dealers typically have their own estimates of the cost of repairs, which may differ from yours. By law, dealers must fix critical problems with cars they plan to resell, so expect your car dealership to deduct the cost of these repairs from the car's trade-in value. An exception is if the dealer intends to sell your car to a wholesaler. Wholesalers buy cars from dealers planning to sell them to other dealers or at car auctions, and they don't always care if the cars they buy have problems. Even if your vehicle needs major repairs, you might be able to trade it in regardless of the condition.

Preparing Your Car for a Trade-In

How much work to put into a potential trade-in depends on how bad the vehicle's problems are. Suppose the car requires significant repairs, such as a blown engine or bad transmission. In that case, it most likely needs professional maintenance, which costs more than you're likely to gain from the trade-in. As a rule of thumb, small cosmetic fixes are worth making.

If your car is dirty, you should wash it thoroughly or have it professionally cleaned. That includes using a dedicated car wash soap for the exterior, getting dirt out around the trim pieces and under the wheel arches. Various wax products also enhance the paintwork if it's starting to look dull or tired. Clean dust from the interior, especially in places such as on the dashboard and around the air vents, radio, touchscreens, and instrument panel gauges. Consider cleaning the upholstery and carpets, too, especially on cars with lighter interiors. Fabrics, especially, retain odors and stains, so having the interior professionally cleaned may pay for itself in increased trade-in value. If your vehicle has leather upholstery, use a leather conditioning product to clean the seats. You should also remove any junk inside your car.

Dealerships usually top up vital automotive fluids, such as oil, coolant, and washer, when inspecting a trade-in car before resell. But low fluid levels may make dealers suspect problems with the vehicle. If the car has air conditioning, make sure it works as intended or charge up the system. Air conditioning fixes can be expensive if something is wrong.

Warning lights on the instrument panel will raise suspicions about the car's condition. In some states, a Check Engine light means it won't pass inspection, while other lights about airbags, traction control, or brakes could be a deal-breaker. Remember to replace any burned out bulbs for both exterior and interior lighting. If the headlights and taillights are foggy, the lenses may need buffing. Rub whitening toothpaste on the lenses with a cloth, then rinse off the toothpaste with water. It's also a good idea to replace your windshield wipers if they are old or cracked. Windshield wipers are cheap, and auto stores typically help customers install them if they can't do so themselves. Check the glass, too. It's relatively inexpensive to fix small cracks or chips, or your insurance company might cover the cost of a new windshield.

Other Considerations

Trade-in values change from dealer to dealer, so it's worth shopping an older automobile around to take advantage of various valuations. Places such as CarMax offer free trade-in appraisals even if you don't buy a car from them. If, for example, you're trading in a Toyota for another Toyota, that dealer will likely pay more for the older car than a Honda dealer would. That becomes even more important with specialized brands like Alfa Romeo or Land Rover.

When trading in your car, bring maintenance records, a full set of keys, and owner's manuals. These add to the car's value regardless of whether the dealer puts it up for sale on their own or sends it to an auction. New keys for some vehicles can cost more than $1,000, and many people don't want to have to pay that out of pocket at a later date. Service records prove repair work was performed regularly, including maintenance such as oil changes, new tire purchases and rotations, and any new parts.

If the vehicle needs significant repairs or has many reliability issues that would result in a dealer offering almost nothing as a trade-in, consider selling to a private party. Selling a car yourself is a bigger hassle than letting a dealership handle the paperwork. Yet, the price you can get from a private party sale is sometimes double the trade-in value. Provided you can buy a new car with other funds, selling an older car on your own may be a viable option.

Even if your car has problems, trading in the vehicle to a dealer has many advantages over selling it to a private buyer. Depending on your trade value, a trade-in may eliminate the down payment on a new car. Dealers are more accepting of problems than private buyers since they can sell damaged cars to wholesalers or fix the issues in their service department. Finally, dealers can handle all the sales paperwork for a hassle-free transfer. Trading in a vehicle with problems can be an excellent way to get it off your hands while helping to fund the purchase of a new car.