Trying to Decide Whether You Should Trade In Your Car? A Private Sale is Another Option.
Buying a new or used car is an exciting time. New technology to enhance the driving experience and great strides in fuel economy and hybrids offer buyers some wonderful transportation options. However the negotiation of the transaction can get dicey when a customer brings a trade-in to the transaction.
Trading in Your Car
Putting a value on a trade-in vehicle is a combination of industry metrics, local marketability of the vehicle, and subjective opinion. Let’s step back and look at how and where auto shoppers obtain estimated values for their cars and trucks.
- Online vehicle pricing guides. Some of the more popular ones are Kelley Blue Book (KBB.com), Edmunds.com, and NADAGuides.com. They provide pricing that ranges from Rough to Clean condition and it’s important to categorize the vehicle correctly with actual mileage and options.
- Vehicle classified websites such as AutoTrader.com and Cars.com will show consumers the asking price for comparable vehicles in the market. Remember these are retail asking prices and not wholesale prices.
- Local auction prices also provide consumers with the wholesale prices that dealers are paying for actual vehicles in the auction lane.
When evaluating your trade-in the auto dealer will look at several values, appraise the actual vehicle and deduct for interior or exterior damage or repairs. If the vehicle is a late model car or truck with good mileage the dealer will retain the vehicle and look to sell it on their lot. These units bring the best prices. If it’s an older vehicle with very high mileage the dealer most likely will sell it at auction or to a wholesaler. These vehicles will not bring much in the way of an actual cash value (ACV) for the purchase transaction.
Other considerations are the brand of the vehicle. For example if you are trading in a Chevrolet at a Toyota dealership you will probably be offered less than you might get if you traded it in at a Chevrolet dealership. Also if gas is at $4 a gallon and you are trading in a large SUV, the offered value will be much lower than market value as these vehicles are not desirable in a high gas price environment. The lower market price for your trade-in can severely impact your monthly payment or your “out-of-pocket” funds for the down payment.
Selling Your Car Privately
If the auto shopper is not happy with the trade-in value offered by the dealership they always have the option of selling the vehicle privately. This is an area where I advise to proceed with caution and consider these scenarios.
1) When you place an ad for your vehicle in the classifieds you will be having many prospects and strangers contacting you to see the vehicle. These folks will know where you live and in conversation might know where you work and your schedule. This isn’t a problem if they are honest buyers but others might not have good intentions.
2) If the vehicle you are selling has a loan balance, you need to have the ability and funds to pay off the loan and obtain the title. Rarely will anyone buy your vehicle if you cannot produce a clear title at the time of payment. Obtaining the title could take from one to three weeks depending on your banks policies and where their title archive is located.
3) Additionally if you are selling a vehicle over $8,000 you will be competing with local dealers for those customers. Unless there is something very unique about your vehicle most consumers would prefer to buy these vehicles from a dealer where they feel some recourse is available if there are issues with the vehicle.
Most often trading the vehicle into the dealer is the preferred process and streamlines the entire transaction. Before taking the vehicle to a dealership for the appraisal I suggest you thoroughly detail and prep the vehicle. That means removing any upholstery or carpet stains, washing and waxing the vehicle and cleaning the wheels and tires so they sparkle. Applying a dressing like Armor All will also make your tires shine like new. If there is body damage that costs more than a hundred dollars you are better off not investing money to fix it, as you will not get that money back when you trade in the vehicle.
If you have time “shop the vehicle” at a few dealers and ask them for an outright purchase price that is not based on your buying a vehicle at their dealership. This will give you an idea of the real market value of the vehicle.
This post was contributed by Mark Dubis, Automotive Consultant and Writer for the auto industry and former owner of Arrow Motorcar one of the top independent leasing companies in South Florida.