It's new car time again! You've selected the next car you'd like to own and now you've got to figure out what to do with the old car.
Do you sell privately or do you trade it in?
This can be stressful for some people, but I'm here to tell you, it doesn't have to be. Let's look at a couple scenarios and see if we can't figure out the best way to go next time you're looking to get rid of your old car and step into something newer.
Scenario #1: Terri has a 2009 Acura TSX with 31000 miles. She has 1 child and just found out she has another on the way and her husband just got a Golden Retriever for the family. Terri needs a bigger car. She is a commuter and is thinking that a mid-size SUV might be the right way to go. She's liked the technology and luxury that she has in her Acura but she really wants to buy American this time. She's most likely going to decide to buy a Buick Enclave. But what about the TSX?
Solution: Having a good idea what her TSX is actually worth is a great starting point. Many consumer driven websites will tell you to save the trade until the end. They will also advise you to keep the new car sale separate from the trade in. Keeping it separate is sound advice, especially if the trade in is paid off. But what if you still owe on your trade? Most likely, in this situation, Terri's going to have a loan balance and if that balance is greater than the actual value of the trade, she's going to have some negative equity to deal with too. And if that's the case, the dealer's going to need to be involved in that.
-Step one. Find out what the trade in is worth. Before going to the dealership, log on to Autotrader.com Here you'll find an excellent tool called: "Guaranteed Trade-In Offer" The Guaranteed Trade In offer is a new, easy way for the customer to get a free guaranteed offer for you to use as a starting point for the value of a trade in. Here at Keyes Woodland Hills Buick GMC and Cadillac, we've been using this tool to help in-market buyers get a fair assesment of what their trade in is really worth. Assuming the car matches what you put down when you arrive at the dealer, the number you get when you use this tool is the least amount of money you can expect for your trade. And that's a good thing because it's guaranteed by Autotrader.
-Step two. Compare the Value you get from AutoTrader with your payoff. Let's say in the case the value came back at $20,415 and the payoff is 25,200. Terri has $4785 worth of negative equity.
-Step three. How much can you put down? Do you have enough cash to buy yourself out of the current loan? If you do, then that is the best way to go. However, if you're like most people, you don't. Or you do, but you're not interested in dropping $5,000 into a new loan. So put down what you're comfortable with and move on.
Yes, it's not the best way to do it.
Yes, you'll wind up upside down in the new loan.
Yes, you still need a bigger car and you also need to find a way to make it work. That's the reality.
-Step four. Negotiate your best deal on the new car. Settle on a fair price for the trade. Take a loan that is "simple interest" and pay that sucker off as quickly as you can. A simple interest loan has no prepayment penalty. So if you can pay more than your minimum due, do so and avoid additional interest charges.
But, what is, specifically, a good deal and a fair price? A good deal is a state of mind. A fair price is what you and the dealership agree on. Only you will know what that is.
Scenario #2: Billy's got a 1996 Ford Taurus Wagon with 185,000 miles on it. It's about to go. For Billy and the Taurus, it's time. Billy's not looking to get into another payment plan and has $15,000 saved up. For his next car he wants to pay cash and buy a clean used car. Does he trade it or sell it?
Solution: Both! Again, the AutoTrader tool can be invaluable. Find out what it's worth. Whatever number comes back, Billy should take a look at the number and see how he feels about it. If it make since to him, then he can trade it in and be done with it. If Billy wants to see if he can get a little more for it, a good idea then might be to invest a few bucks into getting it into selling condition and then either listing it on a site like AutoTrader.com or Craigslist and see what happens. If Billy doesn't have the time or interest in selling it privately, these type of trade ins make a great piece for a charitable contribution.
Scenario #3: Jim and Amy have a 2005 Toyota Highlander that they've used to take the kids to school, go to the store and go to Mammoth 2-3 times a year. The miles are average and consistent for it's age. They've decided to upgrade to a larger SUV and after Jim's promotion they're looking at a Yukon Denali because, like Terri, Jim and Amy really want to buy American. Amy is worried about not getting the full value for the Highlander at the dealer and wants to sell it privately but Jim doesn't feel comfortable playing car salesman.
Solution: Again, the AutoTrader Tool will come in quite handy since this value is guaranteed. Using the Autotrader will give them a real nice bench mark. If they are comfortable with the value, they can trade the Highlander knowing that the AutoTraderAutotrader will give them a real nice bench mark. If they are comfortable with the value, they can trade the Highlander knowing that the AutoTrader value is their "worst case scenario." Now if the value that comes back is still too low or it's enough but they want to see what they can get, that's when you put a for sale sign up and see what happens. Ideally if it doesn't happen for you in two weeks, should probably just trade it in. On a dealer level, we try not to keep a used car in inventory for more than 45 days. Used cars depreciate and the longer you spend trying to sell it, the less you're going to be able to sell it for. Believe me, we FULLY understand this. Selling a used car can quickly turn into a "just minimize the loss" situation. Why do that to yourself?
A note on researching value: There are a lot of places on the Internet to get pricing information about what you car is worth. Kelley Blue Book, The Black Book, NADA, and Edmunds are good tools for researching what your car may be worth. Keep in mind, that the values you see are to be used by you and the dealership as a guide. Local market conditions, current state of the economy, local inventories, current supply and demand of vehicles on the area, the brand image of the make and model and the price of tea in China can all have monumental effects on trade in value.
What does "trade in value" mean? When researching what you car is worth, you may see a term "trade in value." Aside from the obvious implied meaning, this is an estimated figure as to what you may be able to get for your trade in. A dealer however will incur additional costs before they can resell it. Namely, billable hours to the service department to inspect and prepare the vehicle for resale. In most dealerships, the Sales Department is also a client of the Service Department. Tires, Breaks, Smog and Safety, Bumper Touch Ups, Deodorizer, Fixing rips in the interior, windshield replacement, etc are all expenses that can effect what a dealer will offer you for your car. It's important to take that into consideration.
Getting a new car should be fun and exciting. If trying to sell your old car turns out to be more trouble than it's worth, it's really OK to just trade it in as long as you feel comfortable with the value you are offered. Hopefully this will help you down the road.
Feel free to contact the Internet Department at Keyes Woodland Hills Buick GMC Cadillac with any questions you might have!
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