A Good Trade-In Price? by Michael Sheridan
Trading in your old car to buy a new one can be a mystifying and often frustrating experience. Why is it that some dealerships can offer a higher trade-in value for your old car while others seem determined to insult you? Firstly, it’s nothing personal, although you might feel like it is! There are a number of factors that affect the value of your trade-in. It may seem like the dark arts but when you think about it logically, the whole process is easier to understand.
When you decide to trade-in and get a new car it is a very exciting time. It is so easy to get wrapped up in the act of buying your new pride and joy that you can forget the fact you are actually doing two transactions - buying and selling.
Dealers have to turn profit somewhere or we’d have no dealerships. If they take in a trade-in, they can either stock it themselves or sell it on to the ‘Trade’, often because it is too old, or the dealer doesn’t want the customer to see it on sale for a higher price than the trade-in given. There are costs involved to the dealership in terms of time and money spent to prepare it, stock it, advertise it, and sell it.
Car buyers can feel insulted when the price offered for their trade-in. Dealers likewise have to deal with upset customers who as a rule overestimate the value of their car. This estimate is most likely based on seeing the asking price of similar cars advertised, and there can be some emotional attachment to factor in also. It really doesn’t matter how loved or well cared for the trade-in car was – it is simply a depreciating asset. In just a couple of hours, a full valet can turn a tatty trade-in into a showroom star. While it is important to bring your car to the dealership in pristine condition, in truth it won’t make a massive difference to the trade-in price offered.
The mistake people make when they receive a relatively low trade-in offer is to take it personally. Online pricing research of similar cars will find out what people are looking for but not the actual value of the car. The trade-in value offered at dealerships will always be lower than what the car can retail for. Buyers have to allow the dealer some margin for profit. However, if you insist on a higher trade-in price you might get it, but you will find there will be less shifting on the new car’s price as a result.
Dealerships have trade guidebooks that list used cars’ realistic values. You may have heard the phrase ‘book value’, the figures quoted for every make and model of car are based on the model year, fuel type, mileage, manual/auto, condition, depreciation/popularity, etc. Combined it delivers a price the dealer should offer. This actual price offered may vary slightly from dealer to dealer and there are reasons for that.
The perfect alignment of stars is when a customer brings in a car that is popular and saleable to trade in against a car the dealer has in stock. The opposite scenario will see neither customer or dealer overly happy. If a dealer frowns at your trade-in, make sure you know why that is. Usually, it is because the trade-in is not very saleable – think of a lurid pink Jeep Cherokee or similar. The dealer could also be chancing their arm with good old school sales technique. For example, if you were trading-in a silver Corolla, Golf or Tucson in good condition, you can laugh off any low offer and haggle hard. These three are just some of the most bankable and popular cars on the market and will easily be sold on in a heartbeat.
There is so much truth in the old saying “the day you buy is the day you sell” as popular cars in conservative colours with reasonable specifications are easy to turnover and the lifeblood of used car sales. By selecting wisely when buying new, you will have a car that dealerships will welcome warmly anytime as a trade-in. If you buy with your heart that pink Cherokee or a lemon or ‘orphans’ as the trade calls unloved, unpopular cars, you will be politely told where to go come trade-in time.
Remember a dealership will always want to sell its current stock and you will always get the best trade-in deal against the cars you can see with your own eyes. Good salespeople will want you to come back time and time again to buy your subsequent cars and will do their utmost to make a deal happen. Be realistic in the value you put on your trade-in and remember to haggle on the new car’s price too as if you were paying with cash. It’s worth noting also that dealerships make profit on any finance they sell you too - so there is wriggle room there also.
Ultimately the only figure that matters is the cost to change from your old car to new. If you aren’t happy with the deal, say so and be prepared to drive away. In a day or two, you can expect a call back from the salesperson with a better offer – it is after all the classic sales dance!
This article is an independent review by Journalist Michael Sheridan. Michael Sheridan has been a Car of the Year Judge for 20 years, more recently a judge for Van of the Year.
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