Walk into any used car lot these days, and you’ll notice something different. The inventory mix looks older, prices feel stubborn, and dealers are scrambling harder than ever to get their hands on quality vehicles. Behind all of this sits one driving force: trade-ins. In 2025, the cars people bring to the lot when they buy new rides are making waves across the entire used car marketplace in ways we haven’t seen before.

• Trade-in activity directly feeds dealer inventory, with nearly half of new car purchases involving a trade, while used car sales see about one-third trade-in participation.
• The average trade-in age hit 7.6 years in early 2025, up from 7.3 years the previous year, pushing older vehicles into the used market.
• Major retailers like CarMax and Carvana are acquiring over 2 million trade-ins annually from consumers, creating fierce competition for traditional dealers trying to source quality inventory.

Why Trade-Ins Matter More Than Ever

The supply shortage everyone’s been talking about traces back to those pandemic years when new car production basically stopped. Between 2021 and 2022, automakers built roughly 8 million fewer vehicles than normal. Fast forward to 2025, and we’re feeling the aftershocks. Those missing cars never made it to the used market, and now dealers are fighting over every decent trade-in that comes through the door.

Here’s what makes this interesting. When someone trades in their vehicle at a dealership, that car becomes tomorrow’s used inventory. But the whole system depends on a steady flow of people buying new cars and trading in their old ones. Right now, that flow is more like a trickle.

The numbers tell the story. About 49% of new vehicle purchases involve a trade-in, but only around 31% of used car sales include one. That gap means dealers selling used cars can’t rely on their own customers for inventory replenishment. They’re hunting everywhere for good vehicles.

The Age Problem Nobody Saw Coming

People are holding onto their cars longer these days. The average vehicle being traded in reached 7.6 years old in the first quarter of 2025, which is the oldest trade-in age recorded since early 2019. This creates a ripple effect through the entire market.

When trade-ins skew older, the quality of available used inventory shifts. Buyers who want a three-year-old vehicle with low mileage are finding slim pickings. Those desirable late-model used cars are in short supply because production was down three years ago. Meanwhile, the market is getting flooded with vehicles pushing eight years old or more.

Dealers are getting creative with how they work with what’s available. Springfield, Ohio, car dealerships and others across the region have adapted their evaluation and reconditioning processes to keep their lots stocked with sellable vehicles. The reconditioning process has become more important when the average inventory age is climbing.

Big Players Are Changing the Game

Traditional dealerships aren’t the only ones chasing trade-ins anymore. Companies like CarMax plan to acquire 1.3 million vehicles in 2025, while Carvana is pacing toward 700,000. That’s 2 million vehicles getting scooped up by just two national players, not to mention AutoNation, Lithia, and others getting better at direct-to-consumer acquisition.

This competition puts pressure on local dealers to up their game. Many are losing potential trade-ins because they rush the process. A customer comes in wanting to know what their car is worth, and the salesperson immediately pivots to replacement vehicle options. That approach pushes people toward companies that offer straightforward appraisals without the sales pressure.

Smart dealers are fighting back with better technology and processes. Online trade-in valuation tools let customers get estimates before they even visit the lot. This transparency builds trust and captures leads earlier in the buying journey.

The Money Side of Trade-Ins

Trade-ins offer real financial advantages that keep the system running. In most states, customers only pay sales tax on the difference between their new car’s price and the trade-in value. Buy a $40,000 vehicle with a $15,000 trade-in, and you’re only taxed on $25,000. At a 6% tax rate, that saves $900 right off the bat.

These tax benefits create a strong reason for customers to complete both transactions at the same dealership rather than selling privately. Dealers who explain this clearly often see better trade-in participation rates.

For dealers, accepting trade-ins serves multiple purposes. They acquire inventory at wholesale prices, make customers’ purchases easier by handling the old vehicle, and create opportunities for profit when reselling those trade-ins. The margins might be tighter than they used to be, but the volume matters.

Supply and Demand Keep Dancing

Trade-in values have remained surprisingly strong despite market ups and downs. Values sit about 23% higher than pre-pandemic levels, which gives customers decent equity to work with. Someone who bought a vehicle two or three years ago might find they owe less than it’s worth, making the trade-in process smoother.

The catch? Inventory for desirable segments remains tight. Used cars priced under $15,000 are at their lowest availability since 2021. Budget-conscious buyers face limited options, which keeps demand high for anything affordable that hits the lot.

This tight supply means dealers can’t afford to be picky about trade-ins. Vehicles that might have been auction-bound a few years ago are now getting reconditioned and placed on the front line. The wholesale market reflects this pressure too, with auction prices holding steady as dealers compete for every available unit.

What Happens Next

The trade-in crunch won’t ease up anytime soon. Supply constraints are expected to tighten even more through 2025 and into 2026 before things start improving. Off-lease returns are down 36% in 2025, which cuts off another traditional inventory source for dealers.

Electric vehicles are adding an interesting wrinkle to the equation. EVs depreciate faster than traditional vehicles right now, which creates opportunities for dealers to offer budget-friendly options to customers priced out of new cars. These quick-depreciating EVs can help fill inventory gaps if dealers position them correctly.

Technology will keep reshaping how trade-ins work. Better appraisal tools, more transparent pricing, and streamlined digital processes are becoming standard expectations. Dealers who invest in these capabilities will have an edge in capturing trade-ins before competitors do.

Real Talk for Buyers and Sellers

For car buyers, understanding the trade-in situation helps with timing and negotiation. Knowing your vehicle’s value before visiting a dealer puts you in a stronger position. The market favors sellers right now, so if you’re sitting on a clean, well-maintained vehicle with reasonable mileage, you might get a better trade-in offer than expected.

Dealers face pressure from every direction. They’re competing with national players for inventory, managing customer expectations around pricing, and dealing with supply constraints they can’t control. Success comes down to being efficient, transparent, and building relationships that bring customers back.

The used car market won’t stabilize overnight. Trade-ins will continue playing an outsized role in determining what vehicles are available and at what prices. As production recovers and more recent-model vehicles enter the trade-in cycle, the situation should gradually improve. Until then, every trade-in counts.

Do your homework before trading in your vehicle. Get multiple offers, understand your car’s actual value, and don’t let anyone rush you into a decision. The market might be tight, but good deals still exist for people who take the time to find them.