How do trade ins work?

[Dmpsix]

I'm relatively dumb, new and young so unfortunately I'm plagued with terrible money making decisions because I'm inexperienced and have that "I want it now mentality."

Anyways... I was just wondering if I should keep my Camaro SS (I owe $10k on it) and pay $500 a month to help pay it off faster.

I was wondering if I should trade up for a ZL1 or go the Dave Ramsey approach and pay it off and be happy with it.

But let's say I wanted a Corvette (older model like a 08 - 10) and it was relatively the same price ($25-$30k) as when I bought my Camaro.

How does that work? Do I pay the car off first and THEN go for the Vette? Or what?

My KBB of my car is probably like 17-20k for a trade in, 70k miles on a fully loaded RS/SS with Heads up Display.

I should probably keep the Camaro and just save my money right?

[SSJ455]

What you owe would be rolled into the price of the "new" car. You may end up paying more per month because you are paying $30k + the $10k you owe making what you owe $40k.
Personally,I would pay off the Camaro first, then decide if you want to get a used 'Vette. What year is the Camaro?

[ChrisBlair]

They will do anybody a favor and let them trade in any car at any time. Provided there's a certainty they can sell the trade in at a profit.

What you want is to never ever be "upside down" on your car loan- meaning you owe more than it is worth. Ideally you want to maximize every dollar if you choose to trade in, which means a good idea is to have the car paid off.

I traded in a car I owed 4 grand on to get my Camaro. I was motivated beyond "cool, a Camaro" at the time. I actually ended up with a smaller car payment per month than I had previously. But look, a small car payment is not the end all and be all of the game. You want a good deal on the car, not simply a good deal on monthly payments.

If you paid 400 bucks a month for example, over 4 years that's 19200 dollars. But since the interest also factors, you've paid off less than that raw amount on your loan, depending on interest rate. Obviously.

So you have to look at the condition of the car you want to trade in- you want to maximize value. They will inspect the car. they will deduct for things like repairs needed and mileage and if the car needs brakes or tires. Then they will tell you a story. If the 'blue book' value of an 'average' car like yours is 20K, they'll tell you the car needs tires and has high average miles, and they'll give you 15K for trade in. And you'll hem and haw and argue and they will 'relent' and give you 17K. Maybe.

So that's 17K off the price of the car you want to trade in for. But.

You owe money on the car you have. 10 grand. So they add 10K into the mix because your loan must be paid off. So suddenly you're getting that 30K car you're trading in for at 23K. Your loan will be for 23 thousand, not 13 thousand.

With the car I traded in, a five year old model with average miles, sports car, excellent condition, brand new tires, GMPP upgrades with full factory warranty, all maintenance up to date, no work to be done other than put it on the lot and list it- I even gave them the original window sticker- I was able to get 40% of sticker price (not that I paid anything near the sticker price). That was the maximum trade in for the car allowed. Then they turned around and sold it within three days, for 70% of the sticker price. Nice work if you can get it.

Shoulda kept that car...

[ZED SLED]

Another thing to consider is that KBB pricing is over-inflated. You'll get a better idea to bargain with by using NADA or Black Book, which is generally what the dealers use.

[kalimus]

Originally Posted by ZED SLED

Another thing to consider is that KBB pricing is over-inflated. You'll get a better idea to bargain with by using NADA or Black Book, which is generally what the dealers use.

A lot of dealers have indicated they reference Edmunds as well. The last car I traded in was within a few hundred dollars of what Edmunds said I should expect for trade-in. But yeah, don't put any faith in KBB.

[SlingShot]

Another thing to consider, in some states such as Florida you don't pay sales tax on the trade in amount.

[SSJ455]

Originally Posted by SlingShot

Another thing to consider, in some states such as Florida you don't pay sales tax on the trade in amount.

I believe that is the case in all states. The amount you get for the trade in is not calculated in the amount of tax you pay since you already paid the sales tax on it when you bought that car.

[pbeyer2010]

I'm going to guess your loan is not unsecured, this would mean that whomever financed your original loan will appear on your vehicles title. In order to sell the car and transfer the title you will need to pay the original loan off and get a lien release letter from the lender. If you trade the car in at a dealership they would satisfy the balance on the loan and most likely roll the remainder (if you are underwater) into the next vehicle payment.

In any situation, i would do all i could to avoid trading in the car and having the dealer pay off the balance. I would work with the lender to pay the car off as soon as possible and only then would i trade it in to the dealer. My guess is in your situation with the car you describe, you would do better on a trade in with a free and clean title. The dealer is doing you a favor when you trade a car in that is not paid off. They handle the headache of paying off the original loan and transferring the title, those services don't come free, you pay for it with a lower trade in value.

That's my opinion ...

[HookemHorns]

Unless there is something wrong with your car, your best approach would be to pay it off and wait on the future purchase. It's a wise step now to distinguish between a "want" and a "need". At then end of the day, regardless of what anyone says, most folks will do what they want but please remember this, car salesman are in the business to sale and they will make it look like a great deal to entice you to make the move. A little trick they pull is to offer you more for the car than you expect but add it to the price of the new one behind the scenes...buyer beware.

[One Sick Camaro]

being a used car manager myself and seeing people go upside down daily. I always say no car is worth being upside down in. Pay it off.

[PoorMansCamaro]

didn't read other peoples posts, but long story short, if you owe 10k, but trade in value is 17-20k, then you can put that equity towards the new car. for the sake of ease, lets say a dealer would give you 20k for your car. they will pay off the 10k left on your loan and then you can roll over 10k on the new car. so if the zl1 is 50k, you will owe 40k. Just using rough, estimated numbers.

saying all that, DO NOT tell the dealer how much you have left to pay off your car. they will try to low ball you.

[JDP Sales]

Sell your car private party. When you find the buyer, tell them you are trading the car to the dealer and they will be buying it from the dealer for the price you have settled on. Most dealers will do this for you. Its called an in and out. This way you get retail money for your car AND you get the sales tax savings associated with trading the car in.

Youre welcome ;-)

All the best,

Jared Royce
801.545.4215

[JDP Sales]

You're not upside down in a Camaro that you only owe $10,0000 on unless its a huge pile. You're in an equitable position. Even more so if you retail out and use the car as an in and out.

Jared

[One Sick Camaro]

depending on the miles. these cars are not worth more than 25kish. I do this daily lol.