Should You Trade-In Your Used Vehicle Or Sell It?

Bryan
Author:
Bryan
Bryan Daly
Expert Contributor at Loans Canada
Priyanka
Reviewed By:
Priyanka
Priyanka Correia, BComm
Senior Editor at Loans Canada
As a senior member of the Loans Canada team, Priyanka Correia is committed to empowering Canadians with the knowledge they need to make smart financial choices.
Expertise:
  • Personal finance
  • Consumer borrowing
  • Consumer banking
  • Debt management
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Updated On: May 15, 2025
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As beneficial as it can be to have access to your own mode of transportation, many second-hand vehicles become problematic throughout the years, especially when driven regularly. On the other hand, your current car might not be useful to you any longer and you’re now in the market for a more desirable make or model.   

Whatever the reason may be, a standard vehicle trade-in may be a better choice than waiting around to find a private buyer. Not sure if trading in your vehicle is the right option for you? We have all the information you need to make the right choice.


Key Points

  • Trading in your vehicle involves exchanging it at a dealership and applying the credit to the purchase of another car.
  • It’s important to find out what your vehicle is worth before taking it to the dealer to ensure you’re getting a fair deal.
  • Alternatively, you can choose to sell your vehicle privately to get more money for your car.
  • If your vehicle is still being financed, you’ll need to factor in the remaining balance when trading in your vehicle for another.

What Is A Vehicle Trade-In?

A trade-in is when you bring your current car, truck, van, or SUV directly to your local dealership and exchange it for a reduced price on your next vehicle. If the auto dealer sees enough residual value in your second-hand car, they may even offer you a better price than you would find elsewhere. 

How Does The Trade-In Process Work?

Here’s how the trade-in process of a used vehicle works:

Vehicle Inspection And Appraisal 

The dealer will assess your vehicle’s make, model, age, condition, mileage, and market demand to determine its trade-in value. They may have a professional mechanic inspect the car thoroughly before accepting it. 

Offer

Once the dealer determines the car’s market value, they’ll offer you a price for it. You can either accept, decline, or negotiate this price if you believe your car is worth more than what the dealer is willing to offer. 

Auto Loan Repayment 

If you still have an outstanding balance on a car loan for your vehicle, the dealer may adjust the trade-in value. They may contact your lender to settle the auto loan so that the title is clear of any liens.

Credit Toward A New Car Purchase 

The trade-in value will be applied to your next vehicle purchase, which lowers the car price and the amount you’d have to finance. 


Understanding Your Car’s Retail Value

Prior to trading your car in, it’s a smart idea to determine its estimated value on the used vehicle market. After all, even some older cars can command decent retail prices, particularly if the model is rare, fuel-efficient, or cost-effective, has little mileage, or is in extremely good shape. 

There are a few ways to find out the current market value of your vehicle before trading it in:

  • Online Car Valuation Tools. Many third-party platforms are available online to help you get an idea of what your car is worth, such as Carfax, Car Gurus, and Canadian Black Book.
  • Dealership Appraisal. The dealer you’re planning to trade your car in with may evaluate the value of the car. However, you may want to visit a couple of other dealers for a second opinion to make sure you’re getting a fair deal.
  • Online Sales Listings. Check out online listings on sites like Kijiji, AutoTrader, Clutch, and Car Gurus to see what other similar vehicles are going for.
  • Professional Car Appraiser. Hire an expert to provide you with a detailed evaluation of your vehicle.
  • Insurance Provider Inquiry. Check with your insurer to see if they offer car valuation services to help you determine your car’s value.

How Do Dealerships Determine Your Vehicle’s Trade-In Value?

Unfortunately, most vehicles, even brand new ones, lose a significant portion of their retail value as soon as they hit the street. The rate of depreciation is rapid during the first year or two. 

Dealerships are well aware of this fact and will base their decisions on this risk. Ultimately, they could stand to lose a lot of money if they end up with a car that no one wants to buy. 

Because of that, they’ll need to consider a few different things before the trade-in can go through, such as your vehicle’s: 

  • Total mileage
  • Make, model, and trim level
  • Value in a particular area 
  • Overall condition (tires, brakes, ending, interior, body, etc.) 
  • Accident reports (if any)
  • Previous and necessary repairs

All in all, if it turns out that they would have to invest too much money in the vehicle for too little of a return, they may decide that you’re not eligible for a trade-in. However, the opposite can occur if you’ve managed to keep your vehicle in decent condition since you took possession of it. 

Learn more: Can You Trade In A Vehicle That Is Not Paid off?


How To Maintain Your Vehicle’s Trade-In Value

Maintaining or boosting the trade-in value of the vehicle that you’re looking to get rid of can help you fetch more money for it, which can bring down the cost of your new vehicle. As mentioned, your auto dealer will inspect almost every part of your vehicle prior to buying it, so the safest thing you can do is keep your car in the best shape possible, which should start from the get-go.

When trying to uphold your vehicle’s trade-in value, consider the following factors: 

  • How much and where you’ve driven the car
  • What repairs and maintenance it may need
  • When its most recent service check was
  • What kind of receipts and other paperwork your dealer may request
  • Whether all its levels are full (gas, oil, transmission fluid, etc.) 
  • How clean the interior and exterior are
  • What it will cost you to make all these improvements
  • How good you are at negotiating a better price
  • What debts may be left on your car, such as loan payments

As you can now imagine, every dollar that your dealer would have to put toward your vehicle is a dollar that they will add to the final cost of the car that you’re trying to trade it for.


Where Can You Trade In Your Vehicle?

Dealerships in every province and territory offer trade-ins. That said, they are particularly common with dealers that specialize in previously owned vehicles. 

Even if your car doesn’t hold a lot of resale value, many dealerships will take it so they can fix it up and possibly sell it at an open auction. Despite this, it’s still important to research your potential dealership to make sure they are a legitimate business that’s willing to offer you a proper trade-in value for your used car. 


Should You Trade In Your Vehicle Or Sell It Yourself?

When push comes to shove, a vehicle trade-in isn’t always the best choice for your situation, being that many private buyers are more open to negotiation than most auto dealers. However, your final decision should depend mainly on your current financial position and whether or not you’re willing to put forth the work. 

Pros And Cons Of A Vehicle Trade In

Weigh the perks and drawbacks of trading in your vehicle before you take this route:

Pros Of A Vehicle Trade-InCons Of A Vehicle Trade-In
– Faster & more convenient way to get rid of an old car
– No need to go through the trouble of advertising & selling your car 
– You may get a reduced price & better financing options for your next vehicle
– Many dealerships will throw in warranties, additional features, & other perks if your vehicle is valuable enough
– You may not get as much money out of the transaction as you were hoping
– Many costs & documents may be required during the dealership process

Pros And Cons Of A Private Sale

There are also benefits and downsides of selling your car privately:

Pros Of A Private SaleCons Of A Private Sale
– You can often get more money for your car than with a trade-in
– The process is usually cheaper & involves much less paperwork
– You probably won’t have to put as much maintenance into your vehicle
– It can take much more time & effort to find the right buyer
– You’ll need to advertise the car online or through other outlets
– Some private buyers aren’t as trustworthy as some auto dealers

What If There’s Still An Outstanding Balance On Your Car Loan?

If the vehicle you plan to trade in still has an outstanding loan balance, this will be an additional factor to deal with before the transaction is finalized. The process involved depends on the equity in your car. More specifically, whether you have positive or negative equity in your vehicle matters.

  • Trading In A Car With Positive Equity: Positive equity means your car is worth more than the outstanding balance on your car loan. In this case, the trade is easy, as the dealership will use the funds from the trade in to pay off the balance. The remainder will go towards your new vehicle.
  • Trading In A Car With Negative Equity: Negative equity means your remaining loan balance is more than what your car is worth. In this case, things get a little more complicated. You’ll either need to come up with the difference between the remaining balance and your vehicle’s market value, or the dealer can roll the outstanding loan into the new car loan.

Learn more: Can You Trade In A Vehicle That Is Not Paid Off?


Final Thoughts

If you’re in the market for a new car, van, truck, or SUV, then trading in your second-hand vehicle might be the way to go. You can simplify the process by trading it in with the same dealership that you’re buying your new car with. That said, you may also want to consider selling it privately to get more money for your vehicle. Be sure to weigh the pros and cons of each option before choosing which route to take.


Car Trade In FAQs

Should I trade in my car or sell it privately? 

Trading in your vehicle is faster and more convenient, but you may not get as much for your car than you might if you sold it privately. That said, while a private sale may get you more money for your car, it requires more effort and hassle on your part. 

How can I find out my car’s trade-in value? 

Use online valuation tools, check online used car listing sites, or have your car appraised at a dealership. 

Can I trade in a car that still has a car loan? 

Yes, in this case, the dealer will pay off your loan, and the extra value will be applied to your new vehicle. However, if you owe more than the car’s value, you’ll need to either pay the difference between the car’s value and your loan amount or roll the amount still owed on to your new car loan. 

How does trading in my car affect my new car purchase? 

The trade-in value of your current vehicle is applied to your new car purchase as a discount, which reduces the new car price.

 
Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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