Getting the most for your trade-in - Don't fall into a common trap!

Making the decision as to whether to sell a used car or trade it in when it comes time to purchase a new vehicle can often be difficult. There are hassles and both drawbacks and benefits associated with either option. With a little planning and research, the process can become much easier to manage.

Certainly, the quickest and easiest route to go is to trade the old car in at the dealership at which the new vehicle is being purchased. Consumers should first research the value of their old car through online services so that they may negotiate a fair price with the dealer. Among the credible web sites offering insider information on pricing a used car are www.edmunds.com, and www.kbb.com.

These sources will provide both the wholesale price and the market price of a particular used vehicle. Dealerships usually make an offer somewhere around wholesale price or even lower, and will later sell it on their lot for $2,000 more. Knowing how much their used car is worth on the wholesale market will prevent a person from having their trade-in "stolen".

It should be noted, though, that a car in good condition might sell for more privately, but a car in comparably worse condition might actually generate a better offer than what it is actually worth by trading it in at a dealership.

The best way to conduct the process is to negotiate the lowest possible price on the new vehicle first, and only then should the trade-in be mentioned. This prevents dealers from working the value of the used car into a more lucrative profit for the dealership by offsetting a higher offer on the trade-in with a higher price on the new car.

Note also that the trade-in value depends on so many factors about the car and the dealership you are trading it in at that it is impossible to get an accurate amount online. These figures are a good place to start however. Only an actual appraisal at the dealer will determine what you will get for the trade-in.

The trade-in process is, as mentioned previously, a fairly simple process and has several benefits. One of the main advantages of trading-in is that the dealership assumes liability for the vehicle when it is sold on their lot. The dealership appraises the vehicle and makes the customer an offer, which can either be taken immediately or negotiated.

Buyers must take into consideration the fact that the dealer will be offering a wholesale price, as the dealership will be assuming responsibility for subsequently advertising and selling the used car, and will likely put money into repairs and upgrades. Online research will give the customer a good idea of what that wholesale price should be, and prevent them from being duped into accepting an offer that is too low.

Another factor to consider when trading is any sales tax savings you may be entitled to. If you buy a $20,000 car and have a trade-in worth $10,000, you may only have to pay tax on $10,000 and not the total $20,000 depending on where you live. Call any dealer or licensing office in your area to see if this relates to you. This can add more value to your trade because you get $10,000 for the trade-in and save tax on the remaining $10,000 as well. If the tax in your area were 8 percent for example you would save an additional $800 in tax savings.

The disadvantages of trading in are that a dealer will pay you wholesale not retail so you will get less for it. It also adds a process that opens negotiation that may end up being more favorable to the dealer. Your trade-in value is a variable in the buying process that is an unknown amount. The overall condition of the vehicle, equipment, and mileage, supply and demand are all factors in the value of your trade-in.

Without a trade-in you would complete the car price shopping method in section one, take the best price and buy the car. With a trade-in you can't do that. In this case, you will still have to go to a few dealers to see what the best price on you car is. For this reason it changes the buying process slightly.

After you have received price quotes from all the auto sites mentioned in this guide, you will have several quotes from competing dealers in your area. You will probably find that these quotes are all fairly close in terms of actual dollars. Because there are so many factors that reflect a trade value however, you will find that every dealer will likely offer you a different amount. They will likely be fairly close but never the same. The best possible price you can get then is the lowest difference before tax. Look at the following example of four price quotes from dealers.

In this example, we will assume that you received four price quotes from the new car services mentioned in this guide...

Dealer 1 gave you a price of $20,400 plus tax, Dealer 2 was at $20,600 plus tax, Dealer 3 was $21,000 and Dealer 4 was $21,100.All close quotes but dealer one clearly offered the best price. Because your trade is involved however you cannot just go to the dealer that offered the best price and blindly trade-in your car there because each dealer will offer you a different amount for the trade.

Assume that you go to all four dealers and have them appraise your car. Let's assume Dealer 1 gave you $4,000, Dealer 2 gave you $3,800, Dealer 3 gave you $4,800 and Dealer 4 gave you $4,200. You now have enough information to make an informed decision as to what is the best deal. See table below for results:

You now know that Dealer 3 is offering the best deal of $16,200 plus tax. If no trade was involved you would obviously choose Dealer 1 because they quote the lowest price. With the trade however, Dealer 3 gave you more money offsetting the higher initial price on the vehicle. This is why you can never assume that the dealer offering the lowest price on a car is the only dealer you can deal with. A trade-in makes this impossible.

Why do dealers offer different prices for the same trade-in?
There are many factors that determine how much a car is worth outside of the year, condition, and mileage. One factor is the experience of the used car manager or appraiser. An inexperienced manager may pay too much or too less for a trade-in. Even experienced managers can make mistakes. By offering too little they can blow the deal. By offering too much they will make less on the resale of the trade - or even lose money.

Another factor is how hungry the dealer is to get the deal. If their sales volume is down, they may step up and pay more for a trade-in. It stems to job security! Sometimes they may have a customer looking for a car similar to your trade and offer more money to get a quick sale on the new one and a fast turn around on the resale of your trade-in. Too many factors are involved in the process that makes it necessary for you to shop around.

What you can do to improve the value of your trade-in
1) First impressions count. Spending a little money to have it professionally cleaned is usually worth the money. Providing the appraiser with a good impression helps a lot. If they see a messy car they may get the idea that you don't take car of it mechanically.
2) Complete lube, oil and filter change also offers a good impression at the time of appraisal. You don't want to make it look like you never change your oil!
3) Many online guides recommend repairing items that are broken. Be careful here! Don't spend a $1,000 fixing your a/c or any other large part. A dealer will take the reconditioning of the broken part off the trade price but keep in mind that it cost you retail to fix a problem and they get much lower repair prices. It is better for them to take off $500 instead of you paying $1,000. If the repairs are minor such as detailing then go ahead and fix it. Any major repairs should be avoided.

Selling your car privately
Another option is selling the car privately. Consider what it takes to get the most for your trade-in. Look at the example above and you will find that selling it privately is considerable in the amount of work involved! The end result however is usually a much better price for your car. If a dealer is willing to pay you $5,000 for example, you may get $7,000 to $8,000 by selling privately. This is the only true advantage of selling it yourself and you have to admit it is a good one.

The factor that most differentiates trading-in from selling privately is the amount of work involved. First, the seller must research the value of their used car online and in local publications to determine the wholesale and retail market price of the vehicle, as the final selling price will likely fall somewhere in between. A professional appraiser can also be hired to set a value to in addition to this research.

The car must then be cleaned up inside and out, and some repairs might have to be done in order to get it running properly or to avoid liability in the future. Ads should be taken out either in local newspapers, at online services, other local used car publications or a combination of these resources.

Online advertising is a terrific idea, as they are highly accessible by greater volumes of people, and often more information and photos of the vehicle can be supplied than what is available to buyers in classified ads. A budget should be set for this, taking into consideration the profit the seller wants to make on the vehicle and how urgent it is to sell it within a specific time period. (You can find a list of places to advertise by typing "used car classifieds" in Yahoo! )

One good source to advertise your used car is at CarsDirect.com. They have a large volume of people looking at their ads and you should be able to sell your car quickly. Visit CarsDirect.com for details

If you need help the Consumer Guide® Auto Seller's Kit can get you more money for your used car. Set the price. Learn the tactics. Close the deal. All the tools and info you need to close the deal.

Managing a private sale involves spending a lot of time on the phone, receiving voicemail and e-mail, and scheduling appointments for test-drives with potential buyers. When the car is sold, the seller must carry out a transfer of title and registration and cancel their insurance on the car. The Consumer Guide® Auto Seller's Kit can help!

Chapter Four Part One: A Guide to Loans, Credit, and Setting a Budget for Purchasing a New Vehicle >>>