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How to get the most money for your trade in

Should I trade in my old car?

Most people that are shopping for a new car already have a good idea of what they want. With free and readily available online information and a myriad of car buying programs on television, cable services and YouTube, researching and making a purchase decision has become a much easier, albeit time-consuming, process.

But when it comes to deciding what to do with the old vehicle, consumers are not as clear. Car buyers don't tend to spend as much time and effort researching their current vehicle's value and how best to dispose of it. They don't make the same effort to establish a realistic expectation or how to achieve it, but they really should. Being properly prepared and armed with the right information can more than DOUBLE the amount of money your old vehicle will bring. In most cases, the difference is thousands of dollars. So what are the options for disposing of your old car?

  • Keep It - If your current car or truck is paid for (or almost paid for), well-maintained and still in good operating condition, you may opt to keep it. Many consumers purchasing a vehicle will "hand down" or "pass on" their old vehicle to other family members, friends or even donate it (with a tax deduction) to a church or charity. This is still the way that many teenage drivers get their first car today, a hand-me-down from their parents, grandparents, an older sibling or other relative. The biggest considerations to keeping your current vehicle would be:
    • You lose the additional down payment credit of having a trade-in.
    • If the current car is not paid for you would have to make two auto loan payments.
    • The lender for the new vehicle auto loan may require you to trade to be approved.
    • There is a tax benefit from trading in, which you lose if you do not trade.
  • Trade It - According to J.D. Power & Associates surveys, 57% of new-car buyers trade their old car in to the dealer. This is really a convenience option. Trading in a car to a dealership almost always guarantees you will get less than its worth and definitely less than you could get if you sold it yourself. For those car buyers who don't have the time or don't want the hassle and inconvenience of dealing with selling a car, trading is the preferred option. But be aware that the price associated with this "convenience" can be thousands of dollars.
  • Sell It - About 20% of people buying a vehicle will sell their old one themselves. Selling it directly will yield you between 25% and 40% more money, on average, than trading it in. While it clearly takes more effort, the rewards can be substantial and with the availability of free online and even some print resources today, it has never been cheaper and easier to do.

  • Obviously, personal preference and circumstances will dictate which method of dealing with your old car is best for you. But regardless of which way you choose to go, having the right knowledge will help you maximize your efforts. Here are a few pointers, tips and best practice advice to help you get the most money in the least time with minimal hassle.

    Keep Your Old Car

    There really is not a whole lot involved with this option. If you are giving the vehicle to a family member or donating it, be sure to transfer title, registration and tags accordingly. You donít want any delays or issues with government agencies down the road. Be sure to get any receipts or documentation needed for applicable tax credits, and you might want to talk to an accountant or tax specialist before taking any action. Also, donít forget to notify your auto insurance company of any changes.

    Trade In Your Old Car

    Adding a trade to the deal when buying a vehicle creates another point of negotiation to an already complicated process. Not knowing HOW and WHEN to negotiate your trade can cost you a lot of money. If you are trading in your old car to a dealership, you will want to be as prepared as possible in advance.

    Things you need to know about Auto Dealerships and trade-ins

  • Dealers make more money selling used cars than they do selling new ones.
  • The best and cheapest source of used cars for a dealer is from trade-ins.
  • Used-car markup (over cost) is generally 15% to 20% as opposed to 3% to 8% on a new car.
  • Dealer profits are much higher on used cars than new cars.
  • Dealers will pay you well below what they can sell your car for.
  • Dealers will try to "devalue" your trade, highlighting imperfections to justify a lower offer.
  • Dealers will calculate "reconditioning costs" (real or imagined) for your trade to justify a lower offer.
  • Dealers will likely refer to a price guide that's not available to the public.
  • Most dealerships use the regional National Auto Dealers Association Used Car Guide.
  • NADA recently made trade-in values available to the public online at www.nadaguides.com.
  • You can see the actual printed NADA guide that dealerships use through your auto loan lender or auto insurance agent.

  • Know in advance how much your old car is worth

  • Get Local Competing Offers - Call local dealerships for the brand you're trading and ask the used car manager for an approximate sight-unseen offer. Most dealerships will provide this service, some in writing. All sight-unseen offers will be contingent on actually seeing and appraising (devaluing) your vehicle in person, but you can at least get a close approximation and a good ballpark figure of what a dealership is willing to offer.
  • Take Your Car to CarMax - CarMax will give you a free, written, on-site estimate and a commitment to buy your car. CarMax appraisals are typically lower than you could get from a dealership, and their commitment to buy is for a limited time, but having a written offer can come in handy as leverage when negotiating your trade.
  • Get Online Trade-in Values - Get estimates of your car's trade-in value from several online sources:
  • Kelley Blue Book trade-in value is the closest you'll come to predicting what a dealer will actually pay. The site takes into consideration your car's mileage, condition and location. These things can account for very large variations in value, so be completely accurate and honest when inputting information about the year, make, model, trim level, mileage and condition of your car. By looking at the trade in value and retail value for your trade at KBB, you can get a good idea of what a dealership will offer you (KBB trade-in value) and what they will sell your trade-in for (KBB retail value).

    Best practices for negotiating your trade-in allowance

    NEVER tell a Dealership that you have a trade-in until AFTER you have:
    1. Found the car that you want to purchase.
    2. Negotiated and settled on the price for the new car.
    3. Applied and been approved for financing.
    Then and ONLY THEN do you bring the trade into the conversation. A trade-in is another, separate set of negotiations from the purchase price and financing of the new car. The dealer always prefers negotiating the new car, the trade-in and the financing all at once. It is always to their advantage. By combining the negotiations, the dealer can give you a higher trade allowance, but increase the price of the new car to offset it. Conversely, the dealer can give you a great price on the new car but allow less-than-market value for your trade. To get the best possible deal, always negotiate new car purchase price first, financing second, and then ONLY after those two items are acceptable should you introduce and negotiate your trade-in.

    Sell your old car yourself

    Determine the asking price for your car
    Be realistic. You won't get the same retail price dealerships offer unless your car is in pristine condition. Reputable Dealerships recondition used cars and many offer a limited warranty, which adds to the value. Unless you plan to recondition and warrant your old car, you will want to compare what private sellers are asking for vehicles as closely comparable to your car in:

  • Year
  • Make
  • Model
  • Trim level and option package
  • Close to the same mileage
  • In nearly the same condition (Excellent, Good, Fair, Poor, Salvage)

  • Start your research with the local newspaper classified ads, local car or truck sales circulars and magazines. You can also check out many of the online used auto classified sites like:

  • AutoTrader - www.autotrader.com
  • Craig's List - www.craigslist.org
  • Cars.com - www.cars.com

  • Then get estimates of your car's retail value from several online auto valuating sources:

  • Kelly Blue Book - www.kbb.com - mixes auction data with surveys of what dealers pay to determine values.
  • Edmunds - www.edmunds.com - data is based solely on sale prices at wholesale auctions.
  • NADA - www.nadaguides.com - trade-in value assumes the car is reconditioned and ready to sell

  • Make your advertised asking price close to the average asking price for similar vehicles. You can set it a little lower if you want to get more and faster response. You can set it a little higher if you want to leave room for negotiating the price, or you can set a FIRM selling price, which eliminates the negotiating completely but may limit the responses to your advertisement.

    Decide how to sell your car and where to list your car
    There are many options for listing used cars for sale. Many are FREE, some will you cost you, and some advertising sources will allow you to purchase advanced, highlighted or premium placement ads for greater exposure. When choosing where to sell your car, remember that selling a used car is a local phenomenon (usually within 25-35 miles of your location). Research what sources offer the best visibility for your local area before choosing a provider, especially if you are paying for the service. A few good places to start are:

  • Your local newspaper
  • Local Penny-pincher magazines
  • AutoTrader - www.autotrader.com
  • Craig's List - www.craigslist.org
  • Cars.com - www.cars.com
  • Yahoo - www.yahoo.com
  • Ebay Motors - www.ebaymotors.com
  • Kelly Blue Book - www.kbb.com
  • Edmunds - www.edmunds.com

  • A few tips for selling your old car safely, quickly and with less hassle

    Use a buying service to find your new car and sell your old car

    If you gravitate toward convenience over everything else, you may choose to enlist the help of a buying service. A buying service will shop for your new car and most will sell your old car as well for an additional fee. Many banks and credit unions have or are affiliated with buying services, so talk to your lender about who they might recommend. A few to check into on your own are:

  • Auto Advisor
  • Car Q
  • USAA
  • Carsala.com
  • Auto Nation Direct
  • American Automobile Association (AAA)

  • With a little time, effort, research and planning you can add thousands of dollars to your trade-in allowance. But if you have the will and desire to sell your old car directly, you stand to make considerably more than that. Either way, following the recommendations in this article will help you get top dollar for your old vehicle.

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