Can You Trade in Two Cars for One?

Car dealerships usually welcome trade-ins because they can spruce up the cars and make a profit on them. Many car dealerships don't even require that you purchase a car there to trade in your car; instead, you can simply trade in the car and get the cash. This can give you additional buying power because you're not wedded to buying at a particular dealership, so shop around both for good values on the car you want and good trade-in offers at car dealerships.

If you owe more money on your car than its trade-in value, this is known as negative equity. It's challenging to trade in a car in this situation because the bank will have to refinance your car for you to trade it in, in addition to financing your new car. This is typically rolled into one new loan, but if you don't have good credit you might not be able to get a loan large enough to cover both cars. In this case, it's best to keep the car with negative equity and try to pay down the loan, according to the Federal Trade Commission.

Your trade-in value is frequently less than the actual value of your car. Dealers often try to get the same price on trade-ins as they would at car auctions, so be prepared to negotiate your car's trade-in value and check its worth online at a website such as Kelley Blue Book.

If you can't get a fair price for your car or want to maximize the cash you have on hand to get a new car, a private sale might be a better option. You can sell directly to an individual, often for much greater than the trade-in value but much less than the individual would pay if he purchased a used car from the dealership. You'll need to have the car inspected, and many states have additional requirements about private car sales, so check local laws.