Historically, Labor Day weekend is an opportune moment to get a great deal on a new vehicle. But this time around, the great deal could very well come about by selling or trading in your car.
Factory shutdowns or slowdowns related to the COVID-19 pandemic have limited the number of new 2021 vehicles arriving at dealerships, blunting dealerships' need to offer big inventory-clearing sales. At the same time, there's an increasing trend of consumers looking to save money by purchasing a used vehicle.
As such, dealerships are hungry for used cars that they can turn around and sell. The resulting spike in trade-in values could give your next car deal an unexpected boost.
Specifically, the average value for a traded-in vehicle rose by $2,000 from June to July, according to Edmunds' sales data, marking a 16% month-over-month increase. In this seller's market, your trade-in should be a critical part of your buying strategy.
"Knowing how much your current vehicle is worth is arguably as important as the price you're considering paying for your next vehicle," said Ivan Drury, Edmunds' senior manager of insights.
With an eye to maximizing your trade-in value, here are a few tips to help you sell or trade in your car.
Use online appraisal tools to establish a baseline value
This is the first and most important step to take when determining the value of your vehicle. An online appraisal tool will start by asking for your vehicle identification number, license plate or year/make/model information. Make sure to enter your vehicle's trim level, mileage, options and condition accurately since this data will impact the bottom line.
Once your appraisal is complete, pay attention to what's labeled the trade-in value if you're trading in at a dealership, or what's called the private-party value if you plan on selling it yourself. Private-party value tends to be higher, but you'll have to weigh that potential against the value of your time and the hassle of dealing with strangers. Keep in mind that the appraisals are only estimates and will need to be verified by the dealership when the time comes to sell the vehicle.
Compare offers on your trade in
Some appraisal tools may give you the option to get an offer for your vehicle based on the appraised value. At Edmunds, for example, this offer can be redeemed within seven days at participating dealerships. You can use this offer as a reference point to see if other dealerships will match or exceed it, or simply accept the offer for maximum convenience.
It's worth noting that some websites might ask for your contact information in order to generate the offer. As such, you can expect to receive emails and phone calls from dealerships following up about your vehicle. This can be a hassle, but your goal is to get multiple offers and see who will offer the most competitive price.
Check your expiring lease for value
If your car lease expires soon, there might be some equity in it, especially if you've rolled up fewer miles than expected due to the pandemic. Finance companies are good at predicting what a vehicle will be worth at the end of a lease in normal circumstances, but no one could foresee today's rising used vehicle values.
So it's worth appraising your leased car to see if you get an offer greater than the residual value on your lease contract, minus any remaining payments. The process can seem complicated because the vehicle technically belongs to the finance company. But essentially the dealership is buying the vehicle on your behalf, keeping the vehicle to sell later, and then handing you a check for the difference it had appraised for. The dealership will still be able to make money on your car later, so it's a win-win situation. But not all lease companies allow this type of transaction, so make sure you check before proceeding.
Keep the trade-in negotiations separate
A vehicle purchase involves many moving parts, and overlooking the value of your trade-in is a mistake that's easy to make. In the heat of the moment you might be so focused on the selling price of the vehicle you want to buy that you fail to give the trade-in offer a proper assessment.
Handling the trade-in aspect separately can help ensure that you are getting the best overall deal. Edmunds also recommends ignoring the outdated advice of mentioning your trade-in at the last minute. Instead, make sure you get a firm trade-in offer before you even set foot in the dealership.
Lastly, don't overlook your car's trade-in value even if you have an older or high-mileage model. The demand for used cars is so strong now that dealerships are looking to stock their inventory with vehicles of all price ranges.
This story was provided to The Associated Press by the automotive website Edmunds.