Shopping for cars can be intimidating, but it doesn’t have to be. When you’re at the dealership and you’re talking with the salesperson about your trade-in, they might mention some terms you’re not familiar with.
Keeping this in mind, here are some key term definitions that can help you with your next trade-in!
Depreciation: Depreciation refers to how much value your vehicle will lose each year.
Down Payment: Generally, a down payment is considered cash. But a down payment can also be equity from a trade-in. The cash or trade equity is subtracted from the sale price of your new vehicle to reduce how much you need to finance.
Vehicle Valuation Guide: This type of guide gives retail prices for customers looking to find the value of their vehicle, and it also provides a list of trade-in values to dealerships. Some examples of valuation guides are Kelley Blue Book, J.D. Power and Edmunds, among numerous others.
Negative Equity: Also known as being “upside-down,” this happens when the amount you owe on a vehicle is more than the vehicle is worth.
Positive Equity: Often referred to as trade equity, this is when the amount you owe is less than the value of a vehicle. If you’re trading your vehicle in and you have positive equity, you can generally use that equity as part of a down payment on your new vehicle.
Power of Attorney: A power of attorney is a legal document. It allows someone other than yourself to act for you.
Title: The title of the vehicle is the ownership document. When a vehicle changes ownership, the title is transferred to the new owner’s name within a specified period of time, depending on state rules and regulations.
Vehicle Identification Number (VIN): All vehicles that are manufactured for sale to the public have a VIN. One easy place to find the VIN is on the driver’s side door, at the point the door connects to the frame. It could also be on the dashboard.
Understanding what you’re reading, hearing and signing can change your vehicle trading experience. Keep in mind that the salesperson and the finance manager are there to help you understand, but doing your research ahead of time can help you maximize your trade-in experience.
