Expect the dealer to go through your truck, check its history and what it’s selling for and then give you a trade number. In Texas that trade will also reduce your sales tax as the 6.25% tax only applies to the price of the vehicle you’re buying less your trade.
That tax break is the biggest reason to trade in rather than sell on your own. Here’s how the whole thing works and what to watch out for.
How does a dealer figure out my truck’s trade-in value in Texas?
A dealer works backward from what your truck will sell for and then deducts the cost of getting it ready. Here’s what that number breaks down into:
- Year, miles and trim. A newer, lower mile crew cab 4x4 is worth more than a high mile regular cab work truck. Not at all a surprise.
- Condition. Dents, worn seats, cracked glass and tire tread all get looked at. So does anything the dealer has to fix before it can sell the truck.
- History. A clean title and a clean history report help. A branded title (like salvage or flood) hurts a lot.
- What trucks like yours are selling for. Trade values are market driven. A truck that’s in demand right now brings more.
- Equipment. Talk about the upgrades, the gooseneck hitch, the bed liner, the tool box etc. Some of those add value in the right truck. Some of them don’t.
In Northeast Texas a lot of the trades are work trucks. A truck that’s pulled a stock trailer to the sale barn every week will show it and that’s perfectly acceptable. Be up front about it. An honest description from the start means you’re not going to be surprised when the appraiser goes around it.
How much does a trade-in save on Texas sales tax?
Texas charges 6.25% motor vehicle sales tax on the sales price minus your trade-in allowance. So your trade is worth more than its dollar value. It also cuts your tax bill.
Here’s an example. Say you buy a truck for $55,000 and trade in one worth $20,000:
- Without a trade: tax on $55,000 is $3,437.50.
- With the trade: tax on $35,000 is $2,187.50.
- Tax saved: $1,250.
That’s money you’d lose if you sold the truck yourself. The Comptroller says you can’t use the proceeds of a private sale to reduce the tax on your next vehicle. To get the credit the trade has to go directly to the seller as part of the same sale.
If a private buyer offers you $1,000 more than a dealer you may not actually come out ahead when you take the tax into account.
What if I still owe money on my truck?
You can still trade it in. The loan payoff is dealt with as part of the transaction.
If your truck is worth more than you owe then the difference is your equity and that goes toward your next vehicle. If you owe more than the truck is worth then you’re in negative equity. That gap is typically added to your new loan so you’d be paying it off as part of your new vehicle.
Know your payoff before you go in. Call your lender and get the payoff amount. That way you can check the math yourself.
And here’s the good news about the tax. The Comptroller has made it clear that the trade-in credit is based on the value of the vehicle, not your equity. So if you owe money on your truck that doesn’t reduce your tax credit at all.
What paperwork should I bring?
Bring these and the deal goes a lot faster:
- Your title (if the truck is paid off). It has to be signed, with the date and the odometer reading.
- Your lender’s name and your account number (if you still owe on it).
- Your current registration and your driver’s license.
- Every key and remote. A missing key can bring your number down.
- Your maintenance records (if you’ve got them) - they’ll show the truck’s been looked after.
You can keep your license plates. Texas allows the seller to take them off when the vehicle is sold.
What should I do after I trade in my truck?
File a Vehicle Transfer Notification with the DMV within 30 days. It’s an easy step to forget.
Here’s why it matters. Texas doesn’t require the dealer to put the traded truck into the dealership’s name. The truck remains in your name until it’s sold to somebody else. The TxDMV states that if you file the notice within 30 days you won’t be held liable for any parking tickets or toll violations on that truck. It takes a few minutes online.
How do you get a fair trade number?
A fair trade starts with knowing what you have. These steps help:
- Check an online estimate first (it won’t be exact but it’ll give you a range to work from).
- Clean it out and wash it. You don’t need to go right down to a detail job but a clean truck looks better.
- Don’t pay for the major repairs right before you trade as you won’t necessarily get that money back in the trade number.
- Get the trade number in writing and keep it separate from the price of the truck you’re buying so you can see both of them clearly.
And watch out for stacked conditions. That’s when a trade number will only hold if you finance with the dealer, buy an add-on or meet some other condition. It’s very common in this business. It’s also how a good looking number can turn into a bad deal.
How does a trade-in work at Sandlin Chevrolet?
Sandlin Chevrolet in Mount Pleasant, Texas, doesn’t stack conditions on a number. If they give you a trade value it’s not conditioned on financing here or anything else you’ve got to add on.
You can go online. Sandlin’s free trade appraisal form asks for the year, make, model, VIN, mileage, condition and approximate payoff of your truck. Then they appraise it. You can also just drive it in. If you’re trading up you can obviously browse their new and pre-owned inventory before coming in.
Bob Sandlin bought into the Chevy store here in 1937 and it’s still in the family after four generations. Yes, Lake Bob Sandlin is named for him. Chevy refers to itself as the Heartbeat of America and for a store that’s been selling Chevrolets right here in the area since before WWII that’s certainly the case.
Ask for Juan Cruz (voted Best Car Salesperson in the Mount Pleasant Daily Tribune Readers’ Choice Awards) or call the sales team at 903-285-6644.
Frequently asked questions
Does trading in my truck reduce my sales tax in Texas?
Yes. Texas taxes 6.25% of the sales price less your trade-in. The trade has to go to the seller as part of the same sale.
Can I trade in a truck I still owe money on?
Yes. The loan payoff is dealt with as part of the trade. Any equity goes to the new vehicle. If you owe more than the truck is worth then the difference is generally added to your new loan.
Do I need my title to trade in my truck?
If it’s paid off then yes. Bring it signed, with the date and odometer reading. If you still owe on it then you’ll need to bring your lender’s name and account number.
What do I need to do after I trade in my truck in Texas?
File a Vehicle Transfer Notification with the TxDMV within 30 days. That protects you from parking tickets and toll violations on the truck after it’s out of your possession.
Will Sandlin’s trade offer change if I don’t finance with them?
No. Sandlin doesn’t stack financing or other conditions on a trade number.