The Worst Financial Decision You Can Make: Trading In Your Car Too Soon
It's no secret that buying a car is a hefty investment that requires extra consideration when it comes to your finances. However, one factor that many people don't realize is that trading in your car too soon after buying can be a bad financial decision. Not only is this a bad financial position to be in, but it also makes it harder to get a good deal on your next car purchase. After all, who wants to buy a car from a dealer who knows you're desperate? In this blog post, the team at Mike’s Car Store will give you some insight into when the right time to trade in your vehicle is so you can get the best return on your investment.
Why Not to Trade in Too Early
Here are the cons of trading in your car too early. When you buy a car, you're not just paying for the car itself. You're also responsible for taxes, fees, and higher interest rates if you don't put at least 20% down. This means that if you trade in your car shortly after you buy it, you're likely to find yourself "underwater" on the auto loan—owing more money than the car is actually worth. New cars also typically experience the most significant depreciation within the first few years of ownership. Trading in your car too soon means absorbing the brunt of this depreciation, resulting in a lower trade-in value than if you had waited for the depreciation curve to flatten.
When Should I Trade in My Car?
So what's the solution? Experts like Mike Davenport—the owner of Mike's Car Store and popular YouTuber Chevy Dude—recommend holding onto your car for 50-75% of the auto loan term or until you've paid off at least that much of the loan. This will put you in a much better financial position when it comes time to trade in for a new car. Plus, it will save you hundreds of dollars on your monthly payments and thousands on your loan.
Is Trading in Your Car Worth it?
Whether or not trading in your car is worth it will depend on various factors, including your individual circumstances, the condition of your current vehicle, and the financial implications. When it comes to upgrading your vehicle, a trade-in will help you save money on taxes and fees associated with the purchase. Trading in your vehicle will also provide a lot of convenience, as it eliminates the need to sell your car privately and find potential buyers. Our dealership will handle the paperwork and transfer process, saving you time and effort.
What Do Dealerships Do with Trade-ins?
When dealerships receive trade-ins, we have several options for what to do with them. Typically, these vehicles are resold as a part of our used car inventory. However, they can also be auctioned off, traded to other dealerships, exported to international markets, or even scrapped and donated, depending on their condition.
Value Your Trade-in at Mike’s Car Store.
If you're thinking about trading in your car shortly after you buy it, think again. Unless you're willing to pay hundreds or even thousands of dollars more for your next car, it's best to consider holding off a bit. By avoiding the pitfall of trading in your car too soon, you can maximize its value, minimize financial losses, and make a more informed decision that aligns with your financial goals and priorities.
Here at Mike’s Car Store, we always provide trustworthy, fair-market appraisals for vehicles of all makes and models. Contact us to set up an appraisal or value your trade-in online using our Edmunds Trade-in tool. Once you get a trade-in offer our team will be in touch to finalize your trade-in!
