Whether you want to upgrade to a newer model or simply reduce the number of vehicles parked in your driveway, you might be wondering whether you should trade in your car right now.
New-car prices declined some in the first two months of 2022 after hitting record highs at the end of last year. But the market remains unusual with few signs of an imminent drop in values. A combination of low vehicle inventories, persistent supply-chain issues preventing automakers from building cars, and pent-up demand means seemingly countless shoppers sitting on the sidelines waiting to pounce. If you want to trade in your current car, news of high resale values might mean dollar signs are dancing around in your head. Trading in your car could be worth it in some situations.
But there are some considerations to take into account. Let’s have a look.
Car values remain near historic highs
Demand for new cars has made many dealership lots veritable ghost towns with more tumbleweeds than vehicles. As a result, shoppers previously set on a new model started considering — and buying — used cars. Rebates and incentives are almost unheard of now, too.
“Consumers are paying near top dollar for new vehicles as prices remain high and incentives fall to a record low,” said Cox Automotive executive analyst Michelle Krebs. (Cox Automotive is Autotrader’s parent company.)
Big demand led to that uptick in prices. The average new car sold for nearly $46,000 in February 2022, while used cars remained near record highs at around $27,000.
What that means for you:
Your used car is likely worth a lot more today than it was a year or two ago, even if you’ve added more miles to its odometer.
Whatever car you plan to buy is almost certainly going to cost you more now than it would have a year or two ago.
As a result, you need to crunch some numbers.
When does it make sense to trade your car?
Financially speaking, it makes sense to trade in your car in some situations.
Today’s red-hot market won’t last forever, though Krebs points out that soaring crude oil and materials costs could lead to more expensive new cars and, inevitably, costlier used cars.
That means that your used car’s value may remain unusually high for quite some time.
Also read: Meet the boss who gave his workers a raise to help pay higher gasoline prices
If you aren’t looking to buy a new car and have long been debating selling off an extra car, it’s probably a great time to trade it in. Dealers will happily buy just about any car right now, and it doesn’t matter to them if you simply want to hand over the keys in exchange for a check.
It can also make sense to trade in your leased car if the buyout is less than its current value.
See: Dealers are desperate to get their hands on your leased car—how you might make that pay off
If your old car shows signs of needing costly maintenance or repairs that exceed its value — or maybe just exceed your patience — it may also be a good time to trade in your vehicle. Ethically, you’ll want to disclose any issues with the vehicle, of course.
When does it not make sense to trade your car?
The best argument against trading in your car is probably the most common: a driver who plans to replace it with a new (or at least new to them) vehicle.
If you can squeeze a little more time out of your car, even with a lease extension that the financial institution might be willing to offer, you should consider hanging onto it.
With new cars selling at record highs, you will almost certainly pay more for a vehicle today than in the past. Analysts expect car prices to eventually descend from the stratosphere, so new and used vehicles will probably be less expensive in the future.
The flip side to that, of course, is that the value of your trade-in vehicle will also decline compared to what you might be able to get out of it today.
More: Here’s when you can look forward to used car prices finally going down
So, should you trade your car?
The short answer: maybe.
If you want to take advantage of historically high used-car values and don’t plan to replace the vehicle, now is a fantastic time to sell it.
If you want to trade up to a new or newer model, it may make more sense to wait it out unless your current vehicle is in need of costly repairs.
This story originally ran on Autotrader.com.