Let's Get Started
SELLING
VS. TRADING-IN
The dealer's deal — "Great news," the car salesman beams as he returns from the credit manager, "Your credit is good! We can have you driving out the door in a brand new Camry this afternoon."
Wow. You never dreamed it could be so easy to slip into a new set of wheels. But there's even more. "I've worked the value of your old car into the deal as a trade," the sales guy continues. "Just sign here and you're good to go!"
Sell low, buy high? — Guess what? All this comfort and convenience comes with a big price. The dealer is buying your car wholesale. This means he will give you a price that allows him to resell your car at retail for hundreds or even thousands of dollars more when he puts your car on the lot. In addition to his profit margin, he has to absorb the cost of preparing the vehicle for sale, newspaper advertising, sales commissions, arranging financing and standing behind the vehicle for any repair problems.
Cash in your pocket — So how much does all this convenience cost? A leading price guide might list the trade-in value of a four-year old Malibu sedan in excellent condition at $ 10,670 and the retail value at $ 14,101. That's a 40 percent mark-up! Another guide lists the trade-in value of a three-year old Jeep Grand Cherokee Laredo with 38,000 miles at $12,959 and market value at 15,604. Wouldn't you want to keep the $2645 difference in your pocket? You can, when you sell your vehicle yourself.
Trade-in
strategy — How do you know whether
the convenience of trading-in is worth the cost? The fundamental
strategy is to avoid discussing trade-ins until after the dealer
has made his final best offer. With the dealer's best price in hand,
you can now bring up the option of trading-in. This will allow you
to clearly see the "trade difference figure" by comparing the two
deals — with and without the trade. Otherwise, the true trade-in
value of your old car might be buried in the price of the deal,
i.e. a super good price on the new car might blind you from the
lousy trade-in value that is subsidizing the deal.
Timing your sale or trade-in — Dealers receive new price guides at the start of odd-numbered months. If you trade your car after the first of January, March, May, etc., you will likely receive less money than a few days earlier. If you decide to sell as a private-party, late spring (after IRS refunds) is a great time to sell. Also near the Christmas bonus time.
Trade-in: Fair or foul? — Is the trade difference in the neighborhood of the price you were hoping to get for your old car? If it is, you're getting a fair deal. If not, sell it yourself and come back to the dealer later with cash — and cash is always the ultimate bargaining chip.
Trading in older cars — Most banks won't finance a car more than four years old, therefore they're worthless to new car dealers. If your car is considerably older, the dealer may give you as little as 25% of its fair market value. If they give you market value, they're making up for it by overcharging you elsewhere in the deal.
HOW TO DETERMINE YOUR CAR'S VALUE return to top of page
Trade-in
value is what a dealer will offer
for your vehicle. It's also the dealer's wholesale price. Retail
value is the dealer's listed price on the lot. Market value, or
somewhere between wholesale and retail, more closely reflects the
price you can receive for your car when you sell as a private party.
Kelly Blue Book ®, Edmunds® and NADAguides.com are the leading resources for used car values. They all maintain excellent, easy-to-use Web sites to help determine the value of your car.
- Kelly Blue Book lists Trade-in value and Retail value.
- Edmunds lists Trade-in value and Market value.
- NADA lists Low retail, Average retail and High retail.
The Edmunds Market value is a national average of actual and advertised prices, dealers and private parties. These prices are compiled both from advertised prices and after-the-fact phone interviews to determine the actual transaction price.
USING PRICE GUIDESreturn to top of page
Go online —
- Visit Kelly Blue Book online and check the Used Car Values for your vehicle. Note the Retail value.
- Then visit Edmunds online and note the Market value.
- Finally visit NADAGuides.com and note Average retail. In each case, adjust the value accordingly for mileage, condition and factory installed options.
Don't have Internet? — If you don't have Internet access, major newsstands, bookstores and automotive shops often carry printed versions of the guides. Local libraries and banks also have the guides. Libraries also offer free Web access.
LET'S SET THE PRICEreturn to top of page
Start with the price guides — For comparison example, suppose the price guides list a three-year old Jeep Grand Cherokee Laredo 4WD with 38,000 miles at: $17,600, Private Party, Good Condition
Check online listings —Try searching online listings, such as www.craigslist.com, www.autotrader.com or www.carmax.com. These services search by zip code. If you can't find a similar vehicle in your area, try a different zip code, ideally from a major metro area to get more choices. In Southern California, also check www.recycler.com for comparables.
Set the price — We now have a range of prices in hand. Used-car buyers typically expect to get a better deal from a private party than a dealer. In the above example, suppose you found a $17,995 price found in a dealer newspaper ad. This suggests that a lower price, for example $16,500, might be needed to attract private-party shoppers.
Leave room to negotiate — Everybody wants to walk away a winner. Find a price you can live with and pad the price so you can negotiate down. Consider adding 10% to 15% for cars under $3000. More expensive cars add 5% to 7%, but try not to get out of the market price range or no one will call. And remember, you can always make the price more attractive with the "995" gimmick, i.e. $16,995 instead of $17K.