For most of us, the process of buying a new set of wheels often involves having to also get rid of our current car. One of the options available is to trade it in (also known as part exchange in the UK) to the dealer we’re buying our new car from. On the face of it, trade-ins are a quick and easy way to get rid of your old used car.
Sounds like a really convenient way to avoid going through what can be a real hassle. But is trading in your car really the best deal? Not necessarily, especially if you’re not clued in on how dealerships work. Let’s start by looking at the advantages of trading-in your used car.
Advantages of Trading In Your Car
You only deal with the dealer.
If you want to avoid dealing with strangers or don’t have the time to market your car, then you’ll love the convenience of the trade-in process. You only deal with the dealer who handles the entire transaction from start to finish. All you need to do is negotiate the deal, and you’re one step closer to getting your new car. This is, without a doubt, the biggest advantage of trading in your car.
It’s quick and easy.
Selling your car is not an easy or straightforward process. You’ll need to advertise the car and have some sort of insurance while you are selling the car. You’ll also need to spend time answering the phone and dealing with car inspections from savvy buyers. The entire process could take months. Trading-in your car could take place in a matter of hours.
It reduces the price of your new car.
If your car is fully paid up, the dealership will apply the credit for the trade-in amount towards the cost of your new car. This means if you purchase a car for $20,000 and the dealership values your car at $8,000 you only need a loan for $12,000. You also pay less in sales tax.
It is convenient if your car is not worth much.
If your car is quite old and you know you’re never going to get much for it on the open market, you’ll probably be better off trading in the car as a dealer can simply sell it at their next auction.
Disadvantages of Trading in Your Car
Trading in your car is not always the best option, especially if you’re not aware of all of the pitfalls. Here are reasons why:
You’ll likely get offered less money for your car.
It’s almost certain that the dealer will offer you much less than your car is worth. It’s called lowballing, and virtually all car dealers do this. Although trading in your car to purchase a new one is quick, easy and convenient, you will get much more if you sell your car privately. For example, a few years ago, I sold my Saab 9000 for $1500 more than I could get from a dealer but $500 less than the buyer could get from a dealer. The amount that is offered by dealerships will always be much less than the private party value. Sometimes, this difference can run into thousands.
You’re limiting your options.
When you agree to trade-in your vehicle to one dealership, you’re be obligated to buy your next car from that dealership even if you happen to find a better deal elsewhere.
Optional extras are worth nothing.
If you paid a lot of money for expensive optional extras, they will be worth nothing to the dealership, and will add virtually nothing to the trade-in value of the car. On the other hand, a private buyer will appreciate these extras and factor them in the price you’re asking for your car.
Helpful tips on Getting the Best Deal When you Trade in Your Car
If you’ve come to the conclusion that trading in your car is the best option for you, follow these tips to get the best trade-in value:
- Find out what your car is currently worth.
- To do this, start by finding out it’s book value. Good sources of used car valuations include the automotive data services Kelley Blue Book, Glass’s Guide (UK) and Red Book. These services offer an online valuation of your car, providing private, dealer and trade-in values, so you know exactly what you’re working with. You can also check out classified ads online to see what other sellers are asking for the same make and model with similar age, miles and condition as your car.
- Note that these are asking prices, and not necessarily the prices at which the car will be sold. Be sure to note whether you’re looking at private sellers or dealers, because dealers will always offer their cars at higher prices. This is also not the price they will pay, so you can expect somewhere between 10 and 20 percent less as a trade in.
- To get the best possible price for your trade in, present the car as an attractive proposition for the dealer to buy.
- It is therefore important that the car “looks” like it is in excellent condition before you get it appraised. Make sure it is spotlessly clean, as it will command a higher price if it looks like it’s been well maintained.
- During the appraisal, the appraiser will try to find faults with everything in the vehicle in order to lower its value. Before you take it in, wipe down every bit of vinyl and plastic in the interior with spray cleaner. Apply a thin coat of Armor-all on plastic bumpers, windshield wiper arms, door handles and rubber seals at the doors. This makes an astounding difference from near or far. Give the bodywork a thorough wash, clean up the interior and take care of any scratches or dents on the bodywork.
- Provide evidence of regular maintenance, servicing and repairs that you’ve carried out on the car to prove how well you have maintained the car.
- Don’t waste money on servicing or repairs if you’re trading it in because it will not make a big difference unless it is an obvious defect such as a broken windscreen wiper. The dealers will use a chart based on model year, options package and mileage when working out how much your car is worth. As long as the car looks like it is in excellent condition, you’re good to go.
- Do not let the dealership appraise the vehicle by themselves.
- Insist on being present when the appraiser test drives the car. The appraiser is likely to be in the employment of the dealership, and he could intentionally cause damage to your vehicle during the test drive it in order to lower its trade-in value.
- It is important for you to be in control of the entire process when negotiating.
- Keep your cards close to your chest, and don’t give anything away. For example, if you are still making payments on the vehicle you want to trade in, don’t say anything until after the car has been appraised.
- Do not bring up your trade-in until you have finalized negotiations for the car you are interested in buying and are happy with the deal.
- If you can, get the asking price in writing on a buyer’s order. Once you feel confident that you have received the best price on that vehicle, bring up your trade-in offer. Tell the dealer that you have decided to trade your vehicle in after all. This will leave the dealer with no choice but to give you an honest figure for car you are trading-in.
- The dealer’s appraisal of your trade in vehicle will be based on a wholesale price. Since the dealer is in business to make money, he cannot give you a retail price for your vehicle because he won’t be able to make any profit when he sells it. In most cases, the dealer will sell your trade in vehicle to another dealer (usually a much smaller dealer), rather than keep it in his own inventory. This means the wholesale appraisal must be even lower to allow a profit margin on a wholesale price to another dealer.
- When the appraisal is complete, ask to see a copy of the report. Since you were present when the appraisal was being conducted, you can challenge any incorrect information in the report.
- Keep in mind that the appraisal value that the sales person will quote is very likely to be about $500.00 less than he is prepared to allow, so don’t ever accept the first appraisal. Ask for more than you expect to get for your trade-in and leave room for negotiation.
- Dealers will want to pay the least amount they can get away with that is well below the net value of the trade-in. The appraisal amount is likely to be very low and if you don’t know what your car is worth, you are likely to accept any offer. Ask to see the NADA bookout sheet that was printed on the same day. This will give you the most up-to-date trade-in value. When looking at the report, double check the VIN number to make sure you’re looking at the same car. Generally, if your trade-in is in excellent condition, you can expect to get $500 – 1000 less than the NADA trade value, and that is how you should approach negotiation.