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Your timing belt is critical to your engine’s ability to run properly. If it breaks, your engine will stop running immediately and there will likely be damage to other components. That’s why replacing your timing belt is part of regularly scheduled maintenance every 60,000 to 100,000 miles.

Replacement costs can run between $800 and $1,300 as long as you replace your timing belt before it breaks. Costs can be much higher if the belt breaks while your vehicle is running.

Here’s a look at the factors that can affect timing belt replacement cost and signs to look out for that can signal your timing belt needs to be changed.

What Does a Timing Belt Do?

A car’s engine works when a mix of fuel and air combusts inside the engine’s cylinders, which pushes out the pistons that turn the drive shaft. Intake and exhaust valves open and close, allowing the mixture of air and fuel to enter the cylinder and the gases that result from combustion to exit the cylinder. The timing belt ensures that the intake and exhaust valves open and close at the exact time needed.

The timing belt has teeth on it that interlock with the timing gears on the crankshaft and the camshaft. A tensioner holds the belt tight so that it doesn’t skip any teeth, which can be known as jumping time. The timing belt may also turn a gear that powers the water pump.

How Much Is It to Replace a Timing Belt?

The average cost of timing belt replacement is $800 to $1,300. That said, depending on different factors, costs could easily range upward of $1,300 or more. If your timing belt breaks before you replace it, the damage could cost you several times more, as much as $3,000 to $5,000. In some cases, the cost of damage caused by a timing belt break could be more than the value of your vehicle.

If your timing belt breaks while your car is under warranty, your warranty may cover the cost of replacement.

What Affects How Much It Costs to Replace a Timing Belt?

The cost of replacing a timing belt varies according to a variety of factors, including:

Parts Price

Parts and labor are the two main factors that go into how much it costs to fix your timing belt. On average, you can expect parts to cost between $290 and $406.

Your mechanic may suggest that you replace your water pump — which is driven by the timing belt in many vehicles — at the same time, which could cost an extra $100. Doing so may be worth it since your mechanic will already have taken the time and labor to expose the pump.

Labor

Replacing a timing belt takes roughly three to five hours, and you can expect to pay $584 to $857 on labor costs alone. Labor costs can vary depending on where you live and the complexity of the job.

Additional Costs

Your timing belt typically needs to be replaced due to wear and tear associated with driving your vehicle, or about every 60,000 to 100,000 miles. Other parts will likely be wearing out at the same time and your mechanic may suggest replacing them, as well.

Also, if your timing belt breaks, your engine will stop working immediately. In this case, you’ll need to cover the cost of towing your vehicle to your mechanic.

Recommended: The Cost of a Replacement Engine

Signs It’s Time to Replace Your Timing Belt

Your timing belt doesn’t always give you a signal that it’s going to break. Often, the rubber gets old and brittle and simply snaps. However, there are a few warning signs that you should pay careful attention to.

Ticking Sounds

Your timing belt is connected to pulleys on the crankshaft. A timing belt that’s wearing out may not turn them properly, causing a ticking sound.

Recommended: Guide to Crankshaft Repair and Replacement Costs

Engine Starts Suddenly Leaking Oil

A series of nuts hold your timing belt in place. If these get loose, oil can start leaking around the timing belt cover, which can cause the engine to overheat.

New Vibration or Shaking Sensation

A failing timing belt can cause your vehicle to shake or vibrate while moving or idling, and can be a good sign it’s time to have a mechanic investigate your engine.

Engine Feels Less Powerful

A failing timing belt may cause your engine to misfire, as your cylinders can get out of sync. It can also cause your vehicle to perform poorly, which you may notice if you get less power when you press the accelerator.

Trouble Starting the Vehicle

If you can’t start your vehicle, it could be a sign that your timing belt is broken.

Trouble Keeping Vehicle Cool While Running

Your timing belt can help power your water pump. If it’s not working correctly, your engine can overheat. An overheating engine risks damage to other engine parts, so it should be checked out immediately.

Can You Drive With a Bad Timing Belt?

You should not drive with a failing timing belt. If it snaps while you’re driving, your engine will stop, which could put you in a very dangerous position. A broken timing belt can have a ripple effect on other engine components, as well, damaging other parts that will have to be replaced.

Recommended: Cylinder Head Replacement Cost Guide

Financing a Timing Belt Replacement

To cover the cost of replacing your timing belt, you may consider financing with a personal loan or a cash-out auto loan refinance.

A personal loan for car repairs is a type of unsecured installment loan that allows individuals to borrow money to use for auto repairs and other uses. Borrowers agree to pay back the loan in regular monthly payments with interest.

When you refinance a car loan, you pay off your old loan with a new loan, preferably one with a lower interest rate. You may consider refinancing when interest rates have dropped or you’ve built your credit score, helping you qualify for a lower rate. A lower interest rate helps you save money each month, and you can put those savings toward auto repairs.

Another option is a cash-out auto refinance, which allows you to refinance your vehicle and get cash from the loan. You can then use the cash to pay for the repair.

The Takeaway

The cost of a timing belt replacement can vary significantly based on the make and model of your car, with prices typically ranging from $800 to $1,300. Regular maintenance and timely replacement of the timing belt are crucial to avoid more extensive and costly engine damage.

If you can’t afford to replace your timing belt upfront, you might consider a personal loan for auto repairs or a cash-out auto refinance. Either option can help cover the cost of the repair.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

How long will a timing belt last?

Timing belts typically last between 60,000 and 100,000 miles.

How can I prevent my timing belt from failing?

Unfortunately, your timing belt will eventually wear out, but you can prevent it from failing while you’re driving by replacing it during regularly scheduled maintenance. The maintenance schedule should be laid out in your owner’s manual.

Can I replace my timing belt with an aftermarket one?

Aftermarket parts are not made by the original manufacturer. It is possible to replace your timing belt with an aftermarket timing belt, but it is critical to make sure that it is high quality, that it meets vehicle specifications, and that any necessary adjustments are made.

Will my insurance cover the cost of a timing belt replacement?

Your insurance does not cover regularly scheduled maintenance. If your timing belt is damaged in an accident, your insurance may cover it.

Photo credit: iStock/Михаил Руденко

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-109

A second chance car loan, also called a subprime auto loan, is a type of car loan designed for people with fair, poor, or bad credit scores. It’s also a way for people to get auto loans after bankruptcy, repossessions, and other experiences that may have had negative consequences on their credit.

Every lender has a different definition of subprime credit, so your approval for second chance loans will vary. The Consumer Financial Protection Bureau defines a subprime credit score as 619 and below, while FICO® classifies it as below 670. Those with bankruptcies or repossessions on their credit history may also find difficulty getting auto loans.

While a second chance auto loan is generally not as good as one you’d get with a good credit score, it may be what you need to get back in the driver’s seat.

How Do Second Chance Car Loans Work?

Second chance car loans, also known as subprime auto loans, work much like a traditional auto loan.

You’ll apply to a lender to borrow a certain amount of money for a particular car. The lender then evaluates your level of risk based on credit history, credit score, income, and more.

Every lender weighs these factors differently. Once approved, the lender will let you know the terms of the loan. You don’t have to commit to the offer until you sign it.

Pros of Second Chance Car Loans

Besides waiting to build your credit, second chance car loans might be your best and only option to finance a car if traditional auto loans are unavailable.

These loans can also offer a chance to rebuild credit score: Banks and credit unions usually report on-time payments to credit bureaus, whereas “buy here, pay here” dealers usually do not.

Cons of Second Chance Car Loans

The main pro of a second chance car loan is the opportunity to finance a vehicle. There are cons to these loans, though, including:

Higher Rates

Second chance car loans typically means higher interest rates and extra fees. Lenders may also ask you to pay a larger down payment than it would be for a traditional auto loan.

No Chance to Rebuild Credit Score

Not all second chance lenders report to credit bureaus, which means you wouldn’t be able to use it as an opportunity to build your credit. Additionally, some dealers only report late payments and not on-time payments.

Special Conditions

The borrower may have to agree to special conditions before finalizing the second chance auto loan, such as having starter interrupts installed, which can be used to remotely disable the car if timely payments aren’t made.

Requirements for a Second Chance Auto Loan

Unlike traditional auto loans, you don’t need a very good credit score to be eligible for second chance car loans. In fact, some lenders (typically credit unions) will base your approval on your financial ability to make payments, rather than your credit score.

It’s advisable to check with your lender to see what you’ll need to bring to apply. You’ll likely need two valid forms of identification, proof of income documentation, and your Social Security number. You will also need information on the specific car, such as make, model, year, and VIN number. The better prepared you are to provide such documentation, the quicker they’ll be to send an offer.

Refinancing an Auto Loan vs Second Chance Auto Loan

Refinancing a car loan with bad credit is not the same as getting a car loan in the first place if you have bad credit. Essentially, the auto loan refinance process helps people find a way to pay off their existing loan with more favorable interest rates and/or terms. The goal of a second chance auto loan is finding any loan when you have subprime credit scores.

Recommended: Guide to Car Loan Interest Rates

When Is It a Good Idea to Get a Second Chance Auto Loan?

If you really need a vehicle to get to a job and have subprime credit, a second chance auto loan might be your best and only option. With that said, you now have the task of deciding whether it’s worth it. Here’s what you should consider:

Affordability

You’ll need to know if you can afford paying the down payment and loans on time, given your current income and expenses. Think realistically about other costs that come with the car, such as auto insurance premiums, registration, and repairs.

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Length of the Loan

The length of the loan matters arguably more for second chance loans, as the cars purchased are typically older with more mileage. You’ll want to consider whether the length of repayments will outlive the life of the car. The length of the loan may also impact the amount of interest you’ll pay.

Quality of the Loan

You should consider whether the deal is fair. Don’t take one dealer’s word for it. There are many lenders out there, so pause before you rush to complete a deal. Before you even visit a dealership, see what deals are available from banks, credit unions, and online lenders.

If you don’t need a car immediately, try building your credit score over at least a few months to become eligible for a better auto loan. Holding a job, practicing responsible credit card use, and being an authorized user on a responsible friend or family’s account all look very attractive to lenders. Even a month of good practices can make a difference.

Recommended: Understanding Auto Loan Settlements

When Is It a Good Idea to Refinance an Auto Loan?

It’s a good idea to refinance an auto loan once you’ve built your credit score and you won’t have to pay any prepayment penalties.

You’ve Built Your Credit Score

You’ll want to have a higher credit score from when you got your loan. Most lenders won’t refinance your loan until you have at least fair credit (580-669). There’s a bigger upside if all of your payments from the auto loan are reported to the credit bureaus.

No Fees and Prepayment Penalties

You should familiarize yourself with your current loan’s fees and prepayment penalties, if applicable. If you have prepayment penalties on your existing loan, it may not be worth it to refinance your auto loan.

Recommended: What Are Small Car Loans?

The Takeaway

Second chance car loans can help you finance a car, even if you don’t have a good credit score. The catch is that second chance auto loans usually provide loans at higher interest rates. To help you seek the best loans, look for lenders with competitive rates who will report on-time payments to the credit bureaus and don’t penalize for early payments, as these can be great options for refinancing your second chance car loan down the road.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

How can you get a second chance auto loan?

You can apply for a second chance auto loan online or in person, through banks, credit unions, dealerships, and other lenders. The process is nearly identical to that of a traditional auto loan. Just make sure you have all of the necessary documentation and information prepared. Finally, you’ll want to compare rates and loan terms to competitors.

What are the requirements for a second chance car loan?

You don’t need a very high credit score to qualify for a second chance auto loan, but requirements vary by lender. In terms of the application process, you’ll likely need forms of identification, proof of income, and proof of residence. You can bring in pay stubs and other appropriate documentation directed by the lender to verify the information on your application.

What are the pros and cons of a second chance auto loan?

The pro of a second chance auto loan is that it provides those with poor credit a legitimate loan option that may help them have access to a vehicle and build credit. The cons are that second chance car loans typically have high interest rates, fees, and they may hike up your down payment, plus some do not report positive information to credit bureaus.

Photo credit: iStock/Mariia Vitkovska

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-108

A car’s title is a certificate that shows proof of ownership and includes identifying information about the vehicle, such as its make, model, and vehicle identification number (VIN).

A salvage title is a special type of car title that is given to a vehicle that has sustained significant damage in an accident, flood, or other unfortunate circumstance. Typically, the damage is so extensive that the car is deemed unsafe to drive on public roads.

How do you know if a car has a salvage title? Should you buy a car that has a salvage title? Read on to learn more about how a salvage title works, how it affects the value of a car, and whether you can get financing for a salvage title car.

What Does Salvage Title Mean?

If the car has a salvage title, it means that it has been subjected to enough damage in the past that an insurance company has declared it as a total loss. The previous owner may have been in a serious accident, or the car may have been damaged as a result of theft, fire, vandalism, hail, or a flood.

Depending on your state’s laws, a car is considered a total loss when the repairs would cost more than its pre-damaged fair market value. Salvage titles exist so that consumers who purchase vehicles are aware of that car’s history and any potential problems that could result from it.

Recommended: Auto Loan Refinance Calculator

How Salvage Titles Work

If your car has been severely damaged due to a collision or other incident, your auto insurance company may decide it isn’t worth repairing and declare it a total loss. At that point, either you or your insurer will need to get a salvage title for the car. Which party does this will depend on who plans to retain possession of the vehicle.

You apply for a salvage title through your state’s department of motor vehicles (DMV). While the process varies depending on the state, it generally involves filling out an application, paying any required fees, and submitting the car to a salvage vehicle examination to assess the extent of the damages and the vehicle’s overall condition.

If you have a salvage title car, you may be able to sell it for parts. If you want to drive it again, however, you’ll need to repair it and make it safe again. If you opt to go the repair route, it’s a good idea to document the repairs so you can provide proof of the work when you apply for a rebuilt title.

To get a rebuilt title, you’ll need to apply at the DMV and get the car inspected. If it passes inspection, you are granted a rebuilt title. And of course, doing repairs will likely improve the value of your car.

Are Cars With Salvage Titles Damaged?

Yes. Cars with salvage titles have generally sustained enough damage that an insurance company has decided the repair costs would be close to or exceed the car’s value and, therefore, it would not make economical sense to cover the repairs.

However, if the vehicle has a relatively low market value, even minor damage could result in the insurer calling it a total loss. For example, a car that has a fair market value of $3,000 may have sustained only moderate damage (or just cosmetic damage) for the repair cost to exceed the car’s value.

Recommended: Timing Chain Replacement Cost

Pros of Salvage Title Cars

There are actually some advantages to purchasing a vehicle with a salvage title. Here are some to consider.

•  A low price tag. These cars will typically sell for prices far below similar cars with clean titles, which is part of understanding the value of a car with a salvage title.

•  The damage may not be that bad. You could get lucky and find a car with a salvage title that has minimal damage or just cosmetic damage. Or you might find an older car that was considered a loss by the insurer simply because it had a low market value, not because the repairs were all that costly.

•  It may be worth buying for parts. With the high cost of auto parts, it might be worth buying a car with a salvage title to get parts for another car you own and/or parts to sell.

Cons of Salvage Title Cars

Despite some advantages of purchasing a vehicle with a salvage title, there are some definite drawbacks. Here are some to keep in mind.

•  It may be more damaged than it looks. Some damage may not be immediately apparent. The seller must disclose that the vehicle has a salvage title, but it’s up to the buyer to determine the exact extent of the damage. If you’re thinking about buying a salvage or rebuilt title vehicle, it can be a good idea to have it checked out by a mechanic you trust to help spot any potential issues before getting the title signed over to you.

•  Repairs could be costly. There’s a reason why the car got a salvage title. It needs repairs, and these repairs could cost a lot of money when you factor in parts and labor. Also, if the car has a salvage title, it’s no longer legal to drive on the road. To regain legal status, the car must pass an inspection approved by the state once it’s repaired.

•  It may be difficult to get insurance. Not every insurance company will insure a car with a salvage or rebuilt title. If you find one that will, they may offer a liability-only plan that won’t cover the damage to your car if you get in a collision.

Recommended: What Does a Lemon Car Mean?

Determining If Your Car Has a Salvage Title

The easiest way to tell if a car has a salvage title is to look at the title itself. It will typically be clearly marked as salvage. It may even state the specifics, such as if the car went through a flood.

If you don’t have access to the car’s title, there are other ways to investigate a car’s history. One is to request a history report from CarFax or another independent reporting site using the car’s VIN. You can find a car’s VIN stamped on the dashboard near the windshield, on a plate or sticker on the driver’s side door jamb, or stamped on the engine’s firewall.

You can also enter the car’s VIN into the National Motor Vehicle Title Information System to get more background information on the car.

Recommended: What to Do if You Lost Your Car Title

Can You Refinance Salvage Title Cars?

It might be possible to finance or refinance a salvage title car, but it won’t be easy. Auto loans typically use the vehicle as collateral for the loan. This means the lender can repossess the car and sell it if you stop making payments. A salvage title car doesn’t have a high value, making this type of financing riskier for a lender.

There are a few specialty lenders that offer these loans, but you will likely have to make a large down payment and pay a high interest rate. By fixing the car and getting a rebuilt title, it will likely be easier to refinance your auto loan.

Recommended: Can You Refinance a Car Loan With Bad Credit?

The Takeaway

A salvage title means that the car has extensive damage and is no longer roadworthy. However, if it gets repaired and passes a state inspection, it may qualify for a rebuilt title.

While there are risks involved in purchasing a salvage title vehicle, there is also a chance that you could profitably rebuild and resell a salvage title car, or make money by selling off the car’s parts. Just keep in mind that finding a loan to finance or refinance a salvage title car may be difficult.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

What’s a salvage title?

A salvage title indicates that a car has previously been declared a total loss by an insurance company. It must be repaired and receive a rebuilt title in order to be operated legally.

Does having a salvage title reduce the value of your car?

Yes, having a salvage title reduces the value of your car because it indicates that your car has been damaged to the point that repairs will cost close to or more than the car was worth prior to the damage.

Do car loans for cars with salvage titles qualify for refinancing?

Possibly. However, finding a lender who will refinance a salvage title car can be difficult. Large banks tend to be leery of approving loans for cars with salvage titles. And while there may be smaller banks and credit unions that will refinance a vehicle with a salvage title, it’s more likely you’ll need a specialty lender, and rates may be high.

Photo credit: iStock/ThamKC

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-107

Trading in a car can help you reap value from your current car as you move on to your next vehicle. This article takes you step by step through the process, from figuring out the vehicle’s value to sealing the deal. Plus, it also shares the pros and cons of trade-ins, red flags at dealerships, alternatives to trading in a car, and more.

Deciding Whether to Trade in Your Car

Deciding whether to trade in your car is largely a personal decision. Many factors can play into your decision about whether this is the right time to get a new vehicle.

When deciding whether you can afford a new car and shopping for a car loan, consider:

•  The purchase prices of cars you like

•  How much you owe on your current vehicle

•  How much appraised value your trade-in would have

•  How much cash, if any, you can offer as a down payment

•  Additional costs, such as taxes, title fees, and dealer fees

•  Any likely increases in car insurance premiums

If you decide to further explore how to trade your car in, here’s help!

5 Steps to Trade in a Car

The five steps to trading in your car include:

•  Figuring out the car’s value

•  Prepping your vehicle for trade-in

•  Getting quotes on its value from different dealerships

•  Negotiating your trade-in price

•  Completing the transaction

So, more specifically, what do you need to trade in a car? Here’s more info:

1. Figuring Out the Value of Your Car

Fortunately, plenty of online resources exist to help you determine your car’s value. They include:

•  Kelley Blue Book

•  Edmunds.com

•  Carfax.com

•  Consumer Reports

•  JD Power

What If I’m Upside Down on My Car Loan?

With an upside down auto loan, you owe more on your vehicle than it’s currently worth. People can end up with this type of loan when buying a vehicle without making a down payment or by taking an extended term. Or, the loan may have a high interest rate, causing the person to pay more on interest than the principal.

How Do You Trade in a Car That’s Underwater?

Trading in a car that’s underwater can make the transaction more challenging because you may need to pay off the old loan before buying a new one or fold the two loans together. So it’s important to find a lender that is willing to work with this situation.

2. Prepping Your Car for Trade-In

Take care of easy fixes — from handling any current recalls to seeing if there’s a simple way to address the check engine light if it’s on.

The dealer will make a trade offer based on the current condition of the vehicle. While you may decide not to invest in any major repairs at trade-in time, taking care of easier ones can help.

Clean the car inside and out as well so you can present it to best effect. Also, have receipts handy for any work you’ve had done so that you can show the dealer how well you’ve maintained the vehicle. Keeping your vehicle clean and well-maintained may increase the value of your car or slow its rate of depreciation.

Recommended: How Much Does It Cost to Replace Airbags?

3. Getting Quotes from Different Dealerships

To ensure that you get the best price for your vehicle, take it to multiple dealerships that sell the make and model you want to buy.

Taking it to a used car dealership can be a good strategy, too, because it may be in the market to buy vehicles, especially ones that are in good condition with low mileage.

Do your research before going to any dealership and ask questions, especially if the offer sounds either too low or too good to be true. Read any fine print carefully.

Compare the offers you get to see what works best for your situation.

Warning Signs of a Predatory Dealer

After you’ve estimated your vehicle’s value through online resources, you may notice that the dealership quotes are different from the figures on valuation websites. That can be a natural part of the process. But if the price is significantly different, that can be a red flag.

Another red flag is pressure from the dealer for you to make a deal right now. A salesperson may tell you that if you don’t agree to a deal right now, there’s another buyer ready to take the car. They may also say that you need to agree right now or the deal is off the table. Or the salesperson might keep changing the offer, which can be confusing, making you unsure what you’d really be agreeing to.

Additional red flags to look out for: If the salesperson doesn’t seem to want you to inspect a car too closely, that’s a bad sign. And if the deal seems too good to be true, that’s also a sign to be wary.

4. Negotiating Your Trade-In Price

Negotiate your trade-in separately with a salesperson rather than as part of the purchase of another car. That way, they can’t offer you a great price on the new vehicle but then lowball your trade-in value to make up the difference.

Bear in mind that if you can’t get the trade-in value that you think your current car deserves, another strategy you could try is to sell the vehicle to another dealer and then use the cash toward the down payment on your new car.

5. Completing the Trade-In

This process will vary based on whether you still owe money on the trade-in vehicle and, if so, whether it’s more than the value of the vehicle.

If you don’t owe any money on the car, then the process can be pretty simple. The trade-in value is subtracted from the price of the new car and you can either pay that with cash or apply for a car loan.

In the event that the value of your trade-in vehicle minus any loans is more than the price of the new vehicle, the dealership will give you the difference. This can happen if you are, say, downsizing from an imported car to a domestic one.

When you owe money on the vehicle you’re trading in, the dealer will calculate the difference between what it’s worth and what you owe on it. If the number is greater than zero, then that amount is deducted from the price of your new vehicle. If it’s less than zero, then the trade-in car loan is underwater. In that case, to complete the trade-in, you’d need to pay the difference (the amount you’re under water).

Recommended: 0% APR Car Loans: How Can You Get One?

Pros and Cons of Trading in Your Car

Here, in chart form, are the upsides and downsides of trading in a car.

Here, dig in deeper.

Pros of Trading in Your Car

If you trade in a car, you won’t have to find a buyer and go through the stress of selling the vehicle yourself. Selling the vehicle yourself involves setting a price, marketing your vehicle to catch the attention of potential buyers, negotiating the price, and handling paperwork. A dealer does most of that work for you.

You can then sell a vehicle and buy your next one all in the same place, saving you time.

Plus, in many states, tax is only charged on the difference between the value of the vehicle being traded in and the price of the vehicle being purchased.

Cons of Trading in Your Car

You will probably make less money if you trade your car in than if you sold it yourself because dealers want to make a profit and therefore, may offer less.

Plus, your options for your next vehicle are limited to what’s available at the dealership where you traded in your current vehicle.

Recommended: Online Auto Loan Refinance Calculator

Does Trading in a Car Affect Your Credit Score?

Trading in a car may affect your credit score if you have an auto loan on the car and the dealership is slow in paying it off. Late payments can hurt your credit score, and this is one of the risks of trading in a car with a loan that is not paid off.

A dealership typically pays off any outstanding loan balance on a trade-in vehicle and gets the title of the car. But you remain on the hook for the debt until the loan is paid off in full. If you stop paying the loan and the dealership takes too long in covering the outstanding balance, the creditor may report you as late, which can hurt your credit score.

A lower credit score can impact your ability to borrow new money on terms that are right for you. Getting approved for auto financing can be difficult if you have bad credit, but you don’t necessarily need a good or prime credit score to buy a car.

Trading in a car generally has no impact on your credit score if you have 100% equity in your car and intend to buy a new or used vehicle using all cash and no financing.

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Trading in a Car That Is Not Paid Off

How to trade in a car that is not paid off may depend on whether you have positive or negative equity in the car. Positive equity means the appraised value of your car is greater than the outstanding balance on your car loan.

How to trade in a car with a loan may be easier if you have positive equity. You simply go to a dealership and trade in your existing vehicle to help yourself purchase a new or used vehicle.

Negative equity, meanwhile, means the outstanding balance on your car loan is greater than the appraised value of your car. How to trade in a car with a loan may be more complicated if you have negative equity. The dealership may require that you pay off the negative equity upfront, or you may have to borrow more money when financing the purchase of a vehicle.

Trading in a Car With a Loan

Trading in a car with a loan is more complicated than trading in a car without a loan. How to trade in a car with a loan may require that you make arrangements with the dealership to pay off your auto loan in full. How to trade in a car that is not paid off means you have to give the dealership the necessary details concerning your vehicle and car loan.

How to trade in a car with negative equity may require that you go to a dealership with the necessary funds or apply for larger financing. You may pay off the negative equity upfront, or you may agree to a larger auto financing package to cover your negative equity and finance the purchase of a new or used car.

Trading in a car with a loan may not always be a smooth process. When trading in a vehicle with a loan, you may want to continue making payments on your car loan until you get official confirmation of your auto loan being paid off in full. That can help you avoid getting a surprise late payment notice if the dealership takes too long to pay off the outstanding balance.

Factors That May Increase Your Trade-In Value

As mentioned earlier, keeping your vehicle clean and well-maintained may increase the value of your car or slow its rate of depreciation. Modifying your car with a new engine or making other enhancements can also increase the value of your car. Any steps you take to preserve or increase the value of your car can translate into a higher trade-in value.

Alternatives to Trading in Your Car

Perhaps you’re deferring buying a new car because the payments on it would be too high. In that case, paying off your current car loan faster could be a good idea for these reasons:

•  It can remove a payment from your list of monthly bills more quickly and you can enjoy some time without a car payment

•  You’ll have a better asset to trade in once you decide to get another vehicle

Refinancing your car loan can be another route to consider. That means you’ll take out a new loan to pay off what you still owe, ideally at a lower interest rate. Getting an auto refi loan doesn’t replace the car you own but may give you a lower monthly payment. That’s something you may want to consider when comparing auto loan refinance vs. trade-in.

The cost to refinance a car can vary by lender. Fees to compare include early termination fees (with your current lender), transaction fees, registration fees, and title transfer fees. Find out what applies in your circumstance and continue to make payments on your current loan to avoid any late payment fees.

The Takeaway

Trading in one car as you buy another can be a process that suits some drivers. Trading in a vehicle to get another one typically involves evaluating your current vehicle, prepping it for the trade-in, getting quotes from dealers, negotiating the trade-in, and sealing the deal. If trading in a car isn’t the right step for you, options include refinancing your current car loan.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

How long should you keep a car before trading it in?

You should keep a car for at least 3-5 years before trading it in to minimize depreciation losses while still retaining good resale value. Trading in too soon can result in financial losses due to rapid depreciation during the car’s early years. Evaluate market trends and personal needs before deciding.

Does cleaning your car increase its trade-in value?

Yes, cleaning your car may increase its trade-in value. That’s because trading in a clean vehicle minimizes the amount of maintenance a dealership may have to do to get a vehicle ready for resale as a used vehicle. Wear and tear on a vehicle can promote car depreciation. Any additional work a dealership may have to perform to remove odors, dirt, and grime from a used vehicle can lower its trade-in value.

How much money do you lose when you trade in a car?

You don’t necessarily lose any money when you trade in a car, but you may make more money by selling the vehicle to a private party. If a dealership offers you a trade-in value of $8,500 and a private person is willing to buy your used vehicle for $9,900, the difference between the two values tells you what you stand to gain or lose with either transaction. Trading in a vehicle, however, may be the easiest and fastest way to replace your vehicle with another car.

Photo credit: iStock/xijian

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-106

When you’re ready to sell your car or trade it in for a new model, you’ll discover that your car is no longer worth anywhere near what you paid for it. The reason? Depreciation. Depreciation is when your car loses value over time due to normal wear and tear.

Before you sell or trade in your car, there are ways that you can increase its resale value — even if you’ve already made it a point to keep your car in pretty good condition. These tips can help you get more money for your vehicle. That way, you put extra cash in your pocket or get a bigger trade-in credit toward buying a new car.

What Is the Resale Value of a Car?

Your car’s resale value is the amount it’s worth if you were to sell it in its current condition. The state your vehicle is in will have a big impact on its value. A car with 100,000 miles on it, dents in the bumper, and a loud muffler will be worth less than the same vehicle with 30,000 miles on it that’s been kept up.

The make and model of a car will also be a determining factor. For example, luxury cars and SUVs are cars that may hold their value.

You can get an idea of your car’s resale value through online resources like Kelly Blue Book and Edmunds.

Recommended: How Much Is My Car Really Worth?

How Your Car’s Value Is Determined

There are a number of factors that help determine your car’s value.

Popularity of Make and Model

Some car makes and models are more popular than others, and some vehicles may be seen as more dependable, too. As a result, the laws of supply and demand can drive up resale values. If you have a car many people want, resale value will be higher than for cars that are easy to come by.

Trim

The trim level of a vehicle refers to the different available versions of a model. The higher the trim level, the more bells and whistles the vehicle has. This ranges from better fabrics on the seat to engine type. It will also help your car retain its value.

Mileage

How many miles you’ve put on your car, aka your odometer reading, is one of the biggest factors that affects depreciation. On average, people drive their cars about 15,000 miles per year, and the more you drive, the less appealing your car will be to potential buyers.

Age

The older your car is, the lower its resale value. This is because buyers assume a certain amount of wear and tear on the vehicle and higher mileage with older vehicles.

Safety

Safety features, such as blind spot detection and collision warnings, can help drive demand for a make and model of a car, increasing its resale value.

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Accident History

A car that’s been in an accident — even a minor accident — will be worth less. Accidents and repairs show up in a vehicle’s history report. And even if the repairs were made by a professional and are completely unnoticeable, many drivers will still choose a car with a pristine driving history.

Condition

When someone values your car, it will be classified as in excellent, good, fair, or poor condition. Most cars fall into the good or fair category, meaning they have been maintained well and require few repairs. The higher your car scores on this metric, the more it will be worth.

Recommended: 8 Tips on How to Refinance an Auto Loan

Three Tips for Increasing the Value of Your Car

While you drive your vehicle, maintaining its value requires effort on your part. However, doing so will also help ensure you drive the safest car possible and that you’re able to resell it at a fair price when the time comes.

1. Keep Up With Routine Maintenance

Routine oil changes and service checks can help you stay ahead of small problems that might become big, expensive problems down the road. This is key when it comes to increasing the value of a car.

These prevention measures help make sure that all parts of your car are running smoothly for as long as possible. What’s more, a detailed service record can also help boost your car’s value. (In fact, it’s important to save all documentation about your vehicle, from the paperwork you received when you first bought the car to insurance claims.)

Maintenance costs vary depending on the make and model of your car, and you can actually research them online before you even make your initial purchase at websites like Edmunds or Consumer Reports.

Recommended: Luxury Cars With the Lowest and Highest Maintenance Costs

2. Pay Special Attention to Tires

Rotate, balance, and align your tires regularly to avoid wear on your car. If your tires are looking worn when it’s nearing time to sell, investing in a new set can help boost the value.

3. Make Repairs a Priority

If you’ve been driving your car around with some minor damage that doesn’t bother you, like a dented bumper or a broken tail light, consider making those repairs before you sell. Even minor damage can quickly reduce resale value, and it might be the make-or-break factor when a buyer is making their choice.

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Does a New Engine Increase the Value of My Car?

A new engine does increase the value of your car, especially if it didn’t have a working engine before. That said, a replaced engine may raise questions among potential buyers. Engines are supposed to last the life of a car. If they don’t, potential buyers may wonder whether the car has been in an accident, if there is something wrong with the car in general, or if the engine was replaced by someone qualified to make that kind of repair. These questions may be enough to spook buyers.

So, if your engine just has normal wear and tear, you may want to think twice about replacing it.

What to Do After Increasing the Value of Your Car

Increasing the value of your car can help you achieve a higher price when you sell or trade-in your vehicle. It can also make it easier for you if you ever pursue auto loan refinancing. The more your vehicle is worth, the more likely you will be able to find a lender who will offer you a loan.

When you refinance, you take out a new loan — one with better terms or lower interest rates — that you use to pay off your old loan. If you’ve built your credit score or interest rates are down, you may want to consider refinancing. The pros of an auto loan refinance may include a lower monthly payment or lower interest rates, better terms, and you may free up some cash you can use for other financial goals.

That said, there are potential downsides to consider, as well. You may be hit with prepayment penalties, and you should carefully weigh the cost to refinance an auto loan to ensure it ultimately pays off.

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The Takeaway

Increasing the value of your car is achievable through a combination of regular maintenance, strategic upgrades, and meticulous record-keeping. By keeping your vehicle in top condition, addressing both functional and cosmetic issues, you can significantly enhance its appeal and resale value. Increasing the value of your car can also help if you’re looking to refinance your vehicle.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Can you add value to a car?

Yes, you can add value to a car through various methods such as regular maintenance, upgrading parts like the sound system or tires, adding performance enhancements, improving the interior, and keeping detailed records of all repairs and modifications.

How do I increase the value of my car?

You can increase the value of your car by keeping up with routine maintenance, making sure your tires are in good condition, and making repairs a priority.

Does a new engine increase the value of my car?

A new engine can increase your car’s value by improving performance and reliability. However, the increase may not fully cover the cost of the engine. It’s most beneficial for classic or high-performance cars, where a new engine can significantly enhance appeal and resale value.

Photo credit: iStock/m-imagephotography

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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