Say you’re shopping for a new car, and wishing to negotiate the best possible terms regarding the vehicle you’ll be trading in.
The good news is the average value of used cars hit a record high in the U.S. last year, rising 3.4 percent over 2015 to reach $19,189. Edmunds reports in nearly every category, 8- to 15-year-old vehicles retained more of their value in 2016.
By the same token, Edmunds estimates the average new vehicle is worth only 37 percent of what you paid for it five years after it leaves the lot. Further, average vehicle depreciation is expected to increase this year to 17.8 percent, topping last year’s 17.3 percent. Analysts blame that on a glut of used and off-lease vehicles returning to the marketplace following boosted new car sales after the last recession. In general, pickups, crossovers and SUVs are expected to depreciate the least, full-sized cars the most.
It’s important to understand from the start you’re almost certain to get more for your current vehicle if you sell it yourself, since the dealer must buy at near-wholesale costs to make a profit on your car, and may be less interested in buying it if he already has a glut of your car model or category on his lot. That may be why in 2015, only 47.6 percent of new car sales involved a trade in, down from a recent high of 49.7 percent in 2012. However, you may not wish to undergo the work involved in listing and showing your own car, in which case you can’t beat the convenience of the dealership taking on that chore.
If you go that route, consider the following strategies for getting the best possible deal:
- Conduct research on your car’s current trade-in value before starting negotiations. Print out those estimates to bring to the dealer.
- Consider securing a professional appraisal at a no-obligation auto vendor (other than the one with whom you’re negotiating). It may cost $100 to $500 but will result in an objective, documented opinion you can take into the negotiation process, and probably a purchase offer to use as a basis of comparison.
- Check the internet for any attractive trade-in specials at area dealers that may work to your advantage.
- Most experts recommend not spending extra money to detail or fix up your trade-in to get a better price; the repairs may not pay for themselves via higher offers since dealers can handle repairs cheaper than you can.
- Begin trade-in negotiations by showing the dealer your research and asking if he can meet or beat the appraisal price. Say something like “I plan to buy this other car from you today as long as we can agree on a trade-in price.”
- Try to keep your new-car negotiations entirely separate from your trade-in. Some say it’s best to deny you have a trade-in until your new car deal is settled, so the dealer doesn’t downgrade your trade-in price as a condition of the new car price. Others see that as duplicitous. Either way, the trade-in should be written in contract form as a credit against the new-car purchase.
- If all your trade-in offers are about the same and potential buyers refuse to budge, you may have to adjust your expectations. After all, dealers understand their markets, and appraisals are only averages.
- Note that Texas requires you to pay sales tax only on the difference between the new car and the trade-in.
- Consider negotiating at the end of a month, when sales managers are most motivated to hit monthly quotas on which they’re evaluated.
One final word of wisdom: If you’re now underwater on the loan for the car you wish to trade in, you’re financially better off to keep your present car until it’s paid off instead of trading it in. Otherwise, your old debt will simply be rolled into your new debt, making your debt issues even more significant.
Let Amplify help you secure the best possible terms on your next auto loan.