When you trade in a car, you're essentially selling it back to the dealer. You won't always get the best price on a trade-in as compared to selling it yourself, because the dealer needs to spend money to bring your car up to showroom condition and still turn a profit. However, it often is the most convenient way to get rid of an old car when you buy a new one. Since dealers process trade-ins all the time, the paperwork process is usually smooth.
The most important thing you'll need when you trade in your car is your car's title. This is a legal document, often called a "pink slip," that shows you're the authorized owner of the car. Since you can't trade in a car that doesn't belong to you, the title serves as your proof of ownership and gives you the authority to sign over the vehicle.
In some states, such as California, the back of the pink slip also serves as an official bill of sale. There is a space for the names and addresses of the seller and buyer, along with a line for the purchase price of the car. Assuming the title is valid, as soon as the form is completed and signed your trade-in becomes a legally binding document.
Car Loan Paperwork
If you still owe money on the car you want to trade in, you'll have to bring your car loan paperwork to the dealer as well, including your current payoff quote. You can't technically trade in a car you are still paying off, because the bank financing your car loan remains the legal owner of the car and retains the title until you pay that loan in full. Most dealers will offer to roll the amount that you still owe on your trade-in into the loan you're taking out on your new car, if you are financing it through the dealership. In that case, the dealer will pay off your old loan and get the car title from your previous lender.
Documents and Keys
When you trade in your car, provide everything that originally came with the car, or you may not receive the best price. For example, the dealer will want all of the keys that were issued with the car, including the valet key. You'll also want to include documentation that pertains to the car, such as the owner's manual and any other instruction manuals. If you kept proper maintenance records, they can help establish the condition of your car and help ensure you get a good price.