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Vehicle Trade in tips and secrets

What I am about to tell you is kind of a dealer secret. I hope dealers won't get mad at me. I run my business on the idea that you should buy a vehicle based on knowledge and facts instead on marketing.

Best Time to Trade…

A vehicle is not something people buy every year. So when you need a different vehicle you usually have the option of picking the best time for trading in and upgrading your vehicle. Depending on what vehicle you are trading in, there are certain times of the year when your vehicle has a better demand, and if the vehicle you are planning to buy is a different type than the one you have, it very likely has a lower demand at the same time. That is the best time to buy. Let's say you have car and need to have a 4x4 SUV. Usually in the summer the gas prices go up so cars have a good demand and low mpg SUVs have less demand. It is a good time to do the trade in without waiting until the snow falls which is when most people want to buy 4x4s and there is a very low demand on cars. If you have a convertible or low profile vehicle or 2 wheel drive pickup for trade in, I wouldn't try it in the winter - there is no demand for them then, it is best to wait until spring or summer.

Trade-In Price…

This is based on psychology. People value their property. They like to hear that what they own is good and has a high worth. This is the disadvantage when going for a trade in.

I'll give you an example:

Sandy took her car to 2 different dealers and asked about trading her car for a used SUV and she got the following numbers from each dealer. Let's say she was looking at a different type of SUV at each lot.

    Dealer 1 Dealer 2
1 Value of the trade in vehicle $5,000 $4,500
2 Sticker price of the vehicle looking to buy $9,500 $9,500
3 Balance needed to pay $4,500 $5,000
4 Retail Book value of the vehicle looking to
buy
$10,000 $12,000
5 Difference in Sticker price and Book value
of the vehicle looking to buy
Sticker price is $500
less than book
Sticker price is $2,500
less than book

In my experience, most people look at the first 3 numbers (highlighted in yellow) and consider the first line to be the most important - how much the dealer is valuing your vehicle as a trade in.

You can see that Dealer 2 is offering $500 less for the trade in than Dealer 1. So obviously it seems that Dealer 1 has the better deal, and Sandy feels better about Dealer 1 because they valued her property higher than Dealer 2. This usually means that she is more likely to buy from Dealer 1. She doesn't think to check the book value difference of the 2 vehicles she is looking to buy.

If we closely look at the actual value of each of the vehicles being considered for purchase, you will see the difference. Dealer 1 has their vehicle priced only $500 less than Retail Book value while Dealer 2 has priced their vehicle $2500 below the Retail Book value. What this usually means is that Dealer 1 is keeping a larger margin on their vehicle so they can then turn around and give a better trade-in value while still making more money out of the deal than Dealer 2 and this keeps Sandy happy about the deal and about them as a dealer.

This is a very common situation from my experience. I don't think Saindy is ignorant. It is just how the business uses psychology on their customers. Since Sandy looked at two different vehicles from 2 different dealers, it is not easy to determine which dealer is keeping a lower profit margin.

You might think, "OK Megan I got it, go ahead and tell us that all your vehicles are priced way below book value and we get a better deal if we trade in and buy from you."

That is not my main intention. My true intention of writing these articles is just let you know some important facts which I have learned from my experience and which might help you out in the future. These newsletter articles are not for marketing or to drive customers to our business. I love writing. There are no hidden intentions. I have helped many people the best that I can even though I knew that they wouldn't buy from me. I know quite a bit about vehicles and just taking a few minutes of my time to share that knowledge is a pleasure. If you come to me and ask me to give you the facts on a vehicle which is being sold somewhere else, I will gladly pull out all the information about that vehicle and I will not just put it down and try to sell one of mine.

Most people have to work hard to earn money. So let's say Sandy is getting about $12 hour and she had a $1500 value loss from the deal mentioned above. To earn that money she has to work 125 hours. If she had just taken a couple of hours of her time to do the research before buying, she could have a better deal. Ironically, she won't realize that at all. Besides that, if you buy a vehicle very close to retail value; it is very difficult to sell it back or trade it in the future without losing a significant amount of money. Pretty much every week I come across a person who wants to trade in a vehicle which they had bought recently but just came across another vehicle which they had wanted all along. Sadly I can't help them because they paid close to retail value for their vehicle. No dealer will give a value even close to retail for a trade- in. And it is guaranteed that they can't sell privately for the same price they bought it because private party book value of a vehicle is quite a bit lower than retail value. Unless you are ready to take thousands of $$ loss there is no turning back.

Research to do before you Trade…

When checking the book value for a vehicle, most people use Kelly Blue Book or NADA. It takes just a few minutes. Here are the links for their sites

Kelly Blue Book - KBB (I use cars.com KBB link because it is simple, fast and easy to check KBB on their site while giving the same numbers.) Usually you can select more features a vehicle has on KBB than NADA which gives you a more accurate value. (Make sure to type the vehicles mileage in on the KBB page because it automatically selects an average mileage and you would get a wrong value if you do not change it.) At the bottom you will see the Trade in prices depending on the condition of the vehicle. You can also see the Private party price – which shows you that in many cases you can get more from your vehicle by selling outright than trading – but understand that there is usually more hassle involved with that route.

http://www.cars.com/go/kbb/kbbInput.jsp

NADA

http://www.nadaguides.com/

Is checking the book value enough when trading? NO! There is more research to be done if you want to get the right idea. You need to know how much a vehicle like the one you are trading in actually sells for – you need to know what others are asking for similar vehicles. This gives you a much more accurate picture of what your vehicle is worth to the dealership.

Most people list vehicles on Craigslist. It is a good place to do research. But you have to check a larger area to get a more accurate idea and you can only check one city at a time on the Craigslist site. So there is website you where you can search multiple cities. Here is a website where you can search multiple cities.
 

SEARCH TEMPEST

http://www.searchtempest.com/



If a message pops up, select the "No, stay on SearchTempest" button.

This will get you the Craigslist results for multiple cities along with eBay. And ignore the Google ads. You can play around to get the hang of it - it is a useful tool to get an idea of how much most other people are asking for a similar vehicle. I would read listing descriptions to see if there is anything major listed like salvage title or problems so you get an accurate price idea.

***Note: Buying a vehicle off Craigslist is a whole different story. I am not discussing that now. Take a mechanic if you want to buy one. Don't get me wrong, they have great deals. But there are just too many surprises. I used to buy off Craigslist – I would drive hundreds of miles to look at a vehicle just to find out that it was not at all what it was described to be, there were many times where I have turned around and come home empty. But as a price check for vehicles, it is a very good place.

Negotiation Points…

You can check on other major online sales sites to see what vehicles similar to your trade are selling for at other dealerships and by private parties. The main ones are www.autotrader.com and www.carsoup.com and there are others out there. If you find a vehicle similar to your trade in selling for a higher price in another dealership, use it - if you print and take it into the dealership you are looking at, it is undeniable proof which you can use to ask them to increase the trade in value by showing that you know what they are likely to turn around and sell it for - you can also ask them to at least lower the price of the vehicle you are trying to buy to compensate as well.

For example, if you see a similar vehicle on another dealer's lot which is like the one you are trying to trade in, you can simply say,

"John, I saw this dealership has a car much like mine in their lot. They are asking $8000 for it. You are offering to trade mine in at $5000 - since you are about to make around $3000 from this car, can you give me a better deal?"

You need to understand that the $3000 is not the actual reality. Dealers don't technically make money like that. To run an auto dealership is expensive. So dealers don't make money like most people think. This means that you need to be fair in your expectations of the trade in value and not push too far.

The same thing will work if you research what other dealers are asking for the vehicle you are looking to buy. You can use those prices to negotiate the selling price of the new vehicle.

Once you do your homework and take some printouts, you would be surprised at how much you can bargain a deal if you have all the research information in hand.

Getting ready to Trade In…

When you take a vehicle for trade in, take care of the minor things first. Appearance is key – just as your first impression of the vehicle you are looking to buy helps you decide whether you like it or not, the first impression of your trade in helps a dealer determine the trade in value and how likely they are to be able to turn and sell it. Clean it up pretty good, a good vacuuming; some rags and foam cleaner from Wal-Mart or Fleet Farm can do a good job. Taking it through a good car wash is important also. It costs $2 to self wash, which lets you detail the fine points. If you take a nice clean vehicle for trade in, it makes some difference. If your car is more attractive to the dealer, they, like anyone else, will appreciate a nice, clean car. Dealers can't be intimated by just the look of a vehicle though. We have very good experience and a good idea about the value. It is just that a clean nice vehicle makes a positive for the deal.

Besides cleaning, if there is some minor part not working like the power mirrors or a headlight, check the fuse or for a burnt bulb. That way you don't have to bargain for $200 mirror replacement cost or headlight replacement. Those are the points a dealer uses but tend to exaggerate the actual cost for them to fix so you are on the losing end by not fixing them yourself first. I wouldn't put $600 brand new tires on a vehicle though and expect to get that value back. Dealers can do most repairs and parts for much less than you can. For that reason, fixing the expensive stuff doesn't help much. But if you have maintenance records of the vehicle, take the whole file with the vehicle.

To review, check book values and actual market price and prepare the vehicle for trade-in before you take it. You have a better chance to get a good deal. Doing this won't take much of your time or money. It could save you thousands of dollars.

Here is the checklist…
  1. Research the Book value of your vehicle. Both private party and trade-in.
  2. Research the Book value of the vehicle you are looking to buy.
  3. Find the price of similar vehicles selling. Both the trade in and the vehicle you are looking to buy.
  4. Clean your vehicle inside and wash the outside.
  5. Take care about minor repairs.
  6. Gather your service repair bills.
  7. Make a file with printouts regarding the trade-in and purchase vehicle.

 

Trade-In Advantages and Disadvantages…

It is easy; you drop off your vehicle and pick up the one you want. It saves you a lot of time and hassle.

You only pay sales tax for the balance. As an example: If the trade in vehicle value is $5000 and the buying vehicle value is $10,000; you have to pay tax on only $5000 - that is a savings of about $350. If it is an even trade or you trade down and get money back, you don't pay any tax at all. This is quite a bit of money you are saving, especially for higher value vehicles.

The main disadvantage is that if you sell your vehicle privately, most of the time you can get more for your vehicle. Then you can use the money towards the new vehicle purchase. Since there is no trading, you can buy from anywhere, dealer or private party and you can negotiate the price better (cash always talks). But you have to pay sales tax for the full amount. You need to advertise, be available to show the vehicle, accommodate potential buyers for test drives and mechanics inspections and take care of the selling paperwork.

It really is a personal preference – whatever you are most comfortable with will ultimately be the best option for you.

Writing these articles as a dealer I am not getting anything. In fact, it is a negative factor for the business. But I keep my principles. I don't make money out of a buyer's lack of knowledge. I prefer to educate a buyer – a well informed, happy buyer is always my priority.

All I ask of you is this: no matter if you found this to be helpful, wrong or want to argue a point, please just send me a quick feedback to tell me what you think. Your support is what motivates me to write.
Thank you for your time,
Megan Bladow
CEO - CarMartNet LLC Fergus Falls, MN

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