Should You Keep, Sell, or Trade in Your Car?

Before trading in your car, understand how depreciation and equity affect its value.

Whether to trade in or keep your car depends on its value and your finances. KELENY/shutterstock

Most people have a philosophy when it comes to how long to keep a car. Some people want a new car every couple of years, while others drive their cars until the “wheels fall off.” Regardless, the timing of when you actually sell or trade in your car is important from a financial perspective.

Start by assessing your situation to see the broader economic landscape. You’ll need to know the equity you have in your car, depreciation, and other details.

Best Time to Trade in a Car

The best time to trade in a car, according to Edmunds, is within the first two quarters of any calendar year. This is when used cars tend to be more expensive.

But if you’ve missed this window, you’re not out of luck; there are other factors that affect trade-in values.

Some of these factors include current market conditions, vehicle age, and mileage. The car’s brand also factors into trade-in value.

Depreciation and Equity

Depreciation rate and equity are the best gauges for deciding whether to keep or trade in your car. New cars depreciate the most during the first two years.

According to Kelley Blue Book’s parent company, Cox Automotive, during year one, a car depreciates by 16 percent. In the second year, you can expect an additional 12 percent depreciation.

It’s important to know the vehicle’s depreciation or current value you want to trade your car in for. By knowing this, you’ll be able to determine your equity. This is especially important if you still owe money on the car.

According to Edmunds, 72-month loans have been the most popular car loans over the last ten years. That means that people are taking approximately six years to pay off their vehicles. All the while, the depreciation clock is ticking.

The result is potentially less equity, if any, in the car. If the amount owed is more than the car is worth, you’re upside down, and it’s considered “negative equity” according to a consumer advice notice published by the Federal Trade Commission (FTC). This makes it difficult to trade in your car.

For example, if your car is worth $10,000 and you owe $12,000 on the loan, you have a negative equity of $2,000.

Most car dealers and financial institutions will work with you if you have negative equity. According to the FTC notice, they usually roll over the negative equity into your new car loan, so you still end up paying the old loan off. But it does inflate the cost of the new car.

Should You Trade in or Sell a Car?

According to Edmunds, you’ll receive less money for a trade-in than you would if you were to sell your car on your own.

When a dealership pays you for a trade-in, they need to factor reconditioning costs into the price. They also want to make a profit from your vehicle. These two factors impact the price they are willing to pay you.

You also must be aware that the best time to sell your car may not be the best time to buy one.

Knowing this will help you evaluate the price the dealer is offering and decide whether it’s a good time to trade in or sell.

Pros of Trading in a Car

It all comes down to equity. If your current vehicle has positive equity, it’s worth more than you owe, and you can use it to cover the new car’s cost. In other words, you can use your current car’s value as a down payment on a new car. This could reduce the amount you need to finance.

You’ll have less hassle trading in your car than selling it. A trade helps you avoid creating listings, taking photos, and meeting strangers for test drives, etc.

If you still have an active auto loan, the dealership’s finance teams handle the paperwork to pay it off.

Cons of Trading in a Car

The biggest disadvantage to trading in a car is that the dealer usually offers less. You’ll generally make more money selling the vehicle yourself.

According to Rydell Toyota, another con to doing a trade-in is that some dealers will offer a less competitive price on the new vehicle to negate what they are paying you for the trade.

Having negative equity is also a trade-in con. If that’s your situation, you’ll need to pay it off or roll the remaining loan balance into the price of the new car. This could inflate the amount you’ll need to finance.

Should You Keep Your Car?

According to Cox Automotive, at the end of March 2026, the average transaction price (ATP) for a new car was $49,275. If you have negative equity, you might find it financially challenging to roll the remaining balance on your loan into the new car’s price.

As a consequence of these elevated new car prices, people are keeping their cars for longer. At the end of 2025, the average age of cars in America was about 12.8 years.

It all comes down to your finances and lifestyle.

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