Value of Your Trade/ Allowance:
The trade-in value is the amount that the dealer is offering to buy your old vehicle, the offer is influenced by a number of factors. Appraisers take into consideration your vehicle’s condition, the year, and how well it runs. Knowing the value of your trade can help you negotiate better when it comes to purchasing a new vehicle. Once you have agreed to a trade-in value with the dealership, a trade-in allowance should also be established. The allowance is the amount which the dealer is willing to reduce the price of your new vehicle as a result of trading your old one. This can be looked at as a credit from the sale of your old car towards your new one.
Loan Value:
This is the amount that your financing lender is willing to provide toward your new vehicle. Your loan amount depends on numerous factors like your credit score, financial stability, and even unfulfilled loan payments. In some cases, you may have to pay off a current auto loan before a lender offers a new loan.
Retail Value:
This value is dictated by the market, versus trade-in values which are dictated by dealers. The retail value represents the dollar figure that they can (re)sell your used vehicle for. It is key to research the retail value before heading to the dealership. Knowing what your vehicle should retail for can help get you more money towards your trade-in. Some people may find it beneficial to sell the car themselves, this route can sometimes be a long and treacherous uphill battle.
Negative Equity, Upside Down Loans:
It is important to understand the terms of your trade so you avoid being upside down on a loan. Some dealers may offer to pay off the balance of your current vehicle’s loan but be careful to make sure you don’t get into a situation where you owe more on a loan than your car is actually worth. Look at the terms of your loan and make sure a portion of your old loan isn’t “rolling over” onto your new loan.
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