Trading in your car? Here’s how to get the biggest payout

When you find the right new car after a long search, it can be tempting to close as soon as possible. But before you sign, there’s one question that can save — or cost — you thousands.

What should you do with your current car?

Should you trade it in at the dealership or sell it privately? It’s more than a convenience question — it’s a strategy. And with used-car prices still unsettled, the right choice can make a real financial difference.

Let’s break down what actually matters and what the dealership won’t always volunteer.

Financial fork

Most buyers can’t keep their old car when upgrading. They use it as part of the down payment. But there are two very different paths:

• Trade it in.
• Sell it privately for typically more money.

Reality check: Dealerships rarely offer full market value. They need to buy low and sell high — it’s business. Knowing that puts you in control.

If your car is worth $15,000 privately, a dealer may offer $12,000. That’s $3,000 lost — money you could use to lower your loan or upgrade trims.

Why trade-ins win

Sometimes a trade-in is the smarter move — especially in states offering a sales tax credit.

Example: Buy a $40,000 car and trade in a $10,000 vehicle. You’re taxed only on $30,000, which can save you hundreds.

If the tax break closes the gap between your private-sale price and the trade-in offer, taking the trade may be the better move. Plus, there’s no hassle: no listings, no test drives, no strangers.

The timing sweet spot

Timing matters. The best moment to sell or trade is before your factory warranty expires.

• 3 years / 36,000 miles for basic.
• 5 years / 60,000 miles for powertrain.

Cars still under warranty are easier to resell and command higher prices. If your car is paid off, clean, and under those mileage limits, you’re in the prime window.

When you owe money

You can trade in a car with an outstanding loan — but be careful. If your car’s value is less than the payoff, that’s negative equity.

Your options: pay the difference Or roll it into your new loan (not ideal).

This is how people end up upside-down for years. Avoid it by calling your lender for your payoff amount and checking your car’s true value on KBB or Edmunds.

If you have positive equity, that difference becomes your down payment.

RELATED: Quick Fix: What’s the safest used car for my teenager?

CBS/Getty Images

Watching the market

Used-car prices have swung wildly since the pandemic. The market is still strong for vehicles that are under five years old; well below 14,500 miles/year; and properly maintained.

If that describes your car, a private sale may be worth it. If not — high miles, cosmetic issues, or a soft local market — a trade-in may be the smarter, calmer choice.

Mileage and condition

Both private buyers and dealers care about the same things: mileage and condition. Before selling or trading, get the car detailed; fix small cosmetic flaws; replace worn tires or weak batteries; and gather maintenance records.

A clean, documented car always sells faster and for more.

The private sale payoff

Selling privately usually brings the highest price. But it has strings attached: writing the listing, taking photos, answering questions, meeting buyers, and handling title and payment. If that sounds like too much, a trade-in may be worth the lower price. But if you have a desirable car and the patience, a private sale can easily beat any dealer offer.

Final decision points

There’s no one-size-fits-all answer. The right move depends on your equity, your time, your state’s tax laws, your loan payoff, and your tolerance for hassle.

What matters is going in informed.

Know your numbers. Know your choices. Don’t let a dealer rush you. Done right, you can upgrade smoothly and walk away financially ahead.

Bottom line: Do your homework, understand the trade-offs, and choose the path that keeps the most money in your pocket.