Tips for Trading in Your Car
You’re ready to trade out your car for a newer model. Ideally, you want to get the maximum amount for your car on trade in, meaning you would owe less for your new car. But how do you do that? Here are some tips for trading in your car:
Research the value of your car
Use a tool like National Auto Dealers Guides or Edmunds.com to see what cars like yours are going for on dealer sites and from private parties before you begin to talk to dealers. Make note not just of the year, and make, but also the mileage, any extra features that your car has or lacks compared to others, and the condition. Prices may vary by location, so the more comparisons you can find in your state, the better. This research should give you what is known as the "book value" of the car. Some dealers say they use "Black Book value" and others use the "Blue Book value." Either way, it’s a beginning place for negotiations.
Be honest with yourself
If your car has damage, excessive wear, or a distinctive smell you can’t get rid of, acknowledge this. People often see an outlier automobile at the high end of the price range and think, "I can get that for my car." Be realistic about where your car falls on the desirability scale.
Clean your car thoroughly
It may be worth your while to get your car detailed. Prices vary—a lot—depending on where you live and whether you want the detailing folks to just vacuum out the interior and wash the exterior or clean the engine and take out the dings. The cost can range from about $100 up to $800 with most being under $300. If you have a very old car or a damaged car, it’s probably not worth the money. However, if you have a later model car or a car with under 80,000 miles in clean condition, you may very well recoup the cost and then some.
Collect your documents
Have you done regular maintenance on your vehicle? Have you gotten the oil changed at the correct intervals? Changed filters, belts, and other things as suggested? Collect up all the receipts for those maintenance costs. Showing you took good care of a car demonstrates that it’s in good condition.
Call several dealerships
If you know what kind of car you want to buy, focus on the dealerships that sell that kind of car. Call them up and tell them the year, make, mileage, and condition of your car and ask them for an estimate of what they would give you for your old car. Chances are they will say you need to come in. Be wary of any dealership who won’t give you a ballpark over the phone.
Beware the shame game
Dealers may try to convince you they’re doing you a favor by taking your car off your hands but don’t believe it. They make more money on used car sales than on new car sales in general.
Some dealers have strategies like walking around your car, pointing out every flaw while shaking their heads in dismay at this heap of junk you’re trying to unload; then they’ll start with a low-ball offer, hoping that any increase in price will cause you to bite. Don’t take it personally; it’s all about money.
Negotiate the trade separately
Some dealers will play the shell game with the numbers between the price of the new car and the value of your trade. They’ll have the price they want to sell the car for and will claim to do you a favor by offering you $1,000 more than your car’s book value—even though they’re actually getting more than they should for the new car. To keep from falling for these math tricks, negotiate the price of the new car according to its book value without discussing your trade. Then negotiate the trade separately.
Know the tax benefits
Texas offers a tax credit for the cost of the trade-in that only applies if you trade in your car at the same place where you buy your next vehicle. The sales tax for vehicles is 6.25% So if you buy a vehicle, for $25,000 you would normally owe a sales tax of $1,562.5. However, if you trade in a vehicle worth $5,000, you only owe sales tax on the difference, or $20,000, which saves you more than $300 in taxes. The more you get for your trade, the smaller your tax cost.
Don’t forget your documents
If you’re going to trade in a car, don’t forget to bring your title or your loan information, including payoff amount and account number. Be sure you have your vehicle registration and proof of insurance, as well as any extra keys or remotes.
If your car is worth less than you owe
If you owe more on your car than its trade in value, the Federal Trade Commission warns that some dealers will offer to pay the difference, but then they’ll add it to the loan or subtract it from the down payment. If they make that clear from the beginning and you want to do the deal, fine. Make sure they don’t just add it to the cost of the loan without clarifying that this is what they’re doing. In fact, read the paperwork and make sure you know what all the charges are because unfortunately, the car business is prone to scams. If anything in the paperwork is confusing, stop and ask for more information.
Practice walking away
The shame game is only one of many strategies played by dealerships. Others involve talking until you’re tired and hungry, going back and forth in endless negotiations with the manager to “get you the best deal.” Other tactics include wearing you down, co-opting your decision making process by starting at what you want to pay per month, starting a pro-con list, threatening that the deal will change if you don’t buy right now, and asking "What do I need to do to sell you this car right now?" They act as if they’re drawing you into their confidence, and if you don’t buy the car, you’ll sever an important relationship and hurt their feelings. Don’t buy any of it. If anything feels too high pressure or exhausting, walk away. Don’t get into protracted debates over the merits of your trade in or anything else.
Buying a car is a big investment, and it can help your negotiating position to walk into the dealership already having funding in place. If you’d like to take that approach, we’d love to help! Get pre-approved for your CUTX auto loan today.