How Car Warning Lights Impact Your Trade-In Value

July 1, 2020 in Trade-In Value

Usually, it’s a good thing when you get the occasional heads up about an issue or a problem. You know, like a flash flood warning on your phone, or a polite text to let you know a meeting has been cancelled. But for some reason, nobody likes to see their car warning lights pop on when they start their car. 

Why? When your car warning lights come on, it probably means you’re going to have to spend some money. But if you ignore those lights, you might accidentally decrease the trade-in value of your car. And if you neglect them long enough, some of them can turn into a much bigger problem. 

All cars are equipped with a wide variety of sensors (kind of like your body’s nervous system) that alert you to any potential problems with your vehicle. 

These alerts can be minor, letting you know that you left the trunk open. Or they can be very serious, like a mechanical issue with your brakes or the dreaded check engine light. 

What Do Car Warning Lights Mean?

Warning lights come on when one of the sensors in your car detects an issue. Some car warning lights are very specific. You get a warning every time you’re running low on fuel. 

Other lights are more general. The check engine light, for instance, can mean it’s time for an oil change, or it can mean there are serious mechanical issues with your car’s engine.

Some issues can be solved simply by following the instructions in your owner’s manual, but others will definitely require a mechanic.  

Mechanics can plug your car into a computer to reveal the specific code that sensors are sending to trigger your warning lights. 

The whole idea behind warning lights is that they are supposed to prompt you to take action before the underlying issue becomes severe enough to jeopardize your safety or the operation of your vehicle. 

Warning Lights from the Dealer’s Perspective

When a dealer is calculating your trade-in value, they’re trying to find a price that allows them to at least break even when they sell your old car to someone else. 

Believe it or not, dealer profit margins are pretty low. And every extra dollar your dealer has to spend getting your old car ready for resale is one less dollar on their bottom line. 

Every illuminated warning light represents an additional cost for the dealer. 

When a car dealer is evaluating your car as a trade-in, a warning light instantly lowers the price they are willing to pay. If it is a check engine light or a brake light, your trade-in value can decrease significantly. 

Why? The dealer will need to investigate the source of the problem, and spend their own money trying to fix the underlying issue. 

Even something as minor as a low tire pressure warning light can be expensive for the dealer to fix. 

Weighing the Costs of Fixing Car Warning Lights

If your car’s dashboard has illuminated warning lights, you will need to find out what is triggering the warning lights and determine whether or not you want to fix the issue to maximize your trade-in value

Investing a little money in minor repairs might increase your trade-in value enough to offset the costs of the repairs. It is usually cheaper for you to fix minor problems on your own rather than having the dealer take on the responsibility and risk. 

However, in the case of more expensive repairs, it may make more sense to let the dealer handle them. If your car needs a new transmission, for example, you might choose to skip the headache and just trade the vehicle in with the car warning lights on. 

The more information you have about the problem and the cost of fixing the issue, the better position you will be in to evaluate a trade-in offer from a dealer.