When is it considered a good time to trade in?

[Loren]

Given your situation, I think you should keep the Yaris forever. Why would you bother trading in a car that you only drive 5k miles per year as long as that car is reliable and meets your needs?

But, to answer your question, you simply should never sell a car for less than you owe on it, or if you don't owe anything on it, you shouldn't sell it for less than it's worth. Trading = selling the car to a dealer. So, if you bought your car a year ago, you probably got a loan on it and you owe money on it. How much do you owe? How much is the car worth?

I can answer those questions on my car for an example. I owe less than $7k on it and I could probably get at least $8k in trade on it (low mileage 2007's are selling for anywhere between $9k and $12k around here). So, even though I've had it for only a year, if I wanted to, I could justify trading it.

Of course, if I look at it from a different perspective, I'd definitely be losing money to let it go for $8k, even though the loan would be paid off. I put $2k cash down on the car, and I've made $3600 in payments on the car. That's $5600 that I have invested in the car and I'd only see about $1000 of that if I sold it for $8k.

Best bet: Never trade in a car. Ever. Sell your car on the open market, that way YOU make money on the sale, not the dealer. (and while you're at it... never buy a NEW car, but a low mileage used car that's been well cared for)

But, whatever you do, you only have to answer to yourself. If you're comfortable with the deal and can afford it... have fun. Personally, my pet peeves are paying interest and getting a decent value for my money. I try to get the shortest and smallest loan possible to get the job done with minimal interest. My current car loan was $10,000 for 3 years at $301/mo... it's costing me right about $500 total in interest, and I'm okay with that. I paid $10,300 for my Yaris with 5k miles on it when new ones were going for almost exactly $2k more, I was okay with that, too.

Tom was in the typical "new car" situation. When you buy a new car (or pay too much for a used one from a dealer), the car depreciates immediately and isn't worth what you owe on it. With typical 5-year car loans, that situation usually does not equalize until the loan has been paid on for about 2 years.