Will They Give Me Cash Back If I Trade in a Car?

Before taking your car to a dealer for a trade-in, you should thoroughly clean it inside and out and take care of any obvious defects. Headlights and wipers should be working, for example, and the air conditioning system should be fully functional. Have a mechanic diagnose any squeaks or rattles, but fix them only if the expense is reasonable compared to the market value of the car. A little advance prep helps you avoid questions on the car's state of repair when negotiating the trade-in price.

While you look over the lot, the dealer will have a mechanic test-drive your old car. They inspect for paint and body damage, fluid levels, tires and the condition of the interior. Car dealers work off a fairly standard list of used-car values, sorted by make/model/year and condition, when making an offer. You can check prices in the Kelley "blue book," a little yellow paperback that's available at bookstores. The Kelley list is also available online. Dealers use Kelley prices as well as the Manheim index of wholesale auction prices. You should research the value of your car as well so you will know whether the dealer is offering you the right value for your trade-in.

Dealers routinely obtain cars at auction, or from manufacturers, and don't usually offer to buy cars from walk-in customers. If you trade in a car for one of lesser value, however, they might compensate you with a cash payment to make up the difference. Just keep in mind that your car's market price often varies with the season and local buying trends. Dealers will offer more for a car that is in high demand, or one which they need for inventory. They also run a Carfax report to see if your car has been in any accidents or sustained major damage.

Although the dealer might not offer what you think the car is worth, there are advantages to trading in your old car for a new one. You won't have to spend money on classified ads to sell it, make appointments with potential buyers, or worry over payments, title transfers, and a possible return of the vehicle by an unhappy customer. In addition, many states allow you to deduct the trade-in value from the price of the new car for sales tax purposes. Thus, if you buy a $30,000 car and trade in a $10,000 vehicle, you pay sales tax on only $20,000 of the new car's price.