reblog from http://vinadvisor.net/

3 Reasons to Trade In Your Used Car

Car Trade In Value

Jim Dykstra:
Good morning, Jim Dykstra for vinadvisor, welcome. We’re here, as always, to dramatically simplify your purchase and ownership of cars and trucks. So with that, let’s focus on the question at hand today, “What’s a fair price for my trade?” Or maybe what’s a fair price for my car? There’s really two components that are gonna determine the value of your vehicle, supply and demand, how many are out there, how hot or cold is that car in the marketplace right now, how often do they sell? And then number two, the piece you have the most control over is, what’s the condition of the car you’re driving? Is it in great shape or is it just in good or average shape? And remember, we all tend to think our car is in great shape, particularly when we wanna trade it.

So let’s take a look at what your car might be worth to a dealer and their perspective. In this example, a 2011 Chevy Equinox, most dealers start with the valuation of good. But most consumers start where we’re starting here, excellent, very good, and ultimately good. And that makes a big difference, because when you look at those three valuations of the car, from the highest single transaction point to the lowest, it’s about a $3,000 spread. But when you take the midpoint for those three conditions, excellent, very good, and good, it’s about $1,000 difference between those three cars, or those three values. And that difference is almost always related to the condition of your car.

So what’s the market of value of your car when you roll into the dealership? For your car to even be considered excellent, garaged, washed weekly, literally the kind of car when somebody gets in it, they say to you on a regular basis, “Wow, is this a new car?” That’s how good it has to look before you get to the dealership. A $250 detail is not gonna make the car look like that. A dealer looks at cars every day, they know. Very good, similar but a little more wear. Good is where most cars are gonna fall, and that’s certainly where most dealers are gonna start the valuation process. Fair, that means a little rough around the edges, probably hasn’t been in the garage very much, it’s got rained on more than it’s gotten washed, if you know what I mean, and it lives outside. So be honest with yourself about what the value of your car is. Just one simple attempt, wash it more often, that will make a lot more sense and help you in terms of valuation.

Should I trade my used car in to the dealer or do I sell it myself?

I get this question all the time. And the answer is, “Whatever the right answer is for you.” So a dealer starts by looking at a trade-in from good condition, if you will, and if you compare that to the value of that car, when you look at, say, a private party price on the marketplace, the difference between those two numbers is about $2,000. So most consumers would say, “Wow, for $2,000 I’ll sell it myself.” But here’s what you need to understand, to be able to garner that $2,000 of profit, you’re gonna need a couple things, ’cause the average dealer spends over $1,000, at least, to sell your car. $700 to recondition it, safety inspection, dealers always put new tires on, really just for liability, because if they don’t know the quality of the tires and there’s an accident, they’re likely to be in a litigation issue, so they always put new tires on used cars. And they’ll spend $300 to $400 advertising. So even after that, their cost basis really is $13,500, if they get $14,500 there’s about a $1,000 profit opportunity. And remember, it takes a dealer who does this every day, 30 to 45 days on average, to sell a used car. If you’ve ever listed a car for sale, taken it down to a consignment lot, and the phone hasn’t started ringing off the hook, you can understand it just takes a little time to sell a car.

Why should you trade your car in?

From a risk standpoint, I think the most important thing to consider is, if you’re gonna go give your car to a person you’ve never met at the Costco parking lot:

1. “Are the funds he or she’s gonna give you verified? Do you have a cashier’s check? Are you sure the money’s good?”
2. If you have a payoff to a lender, if you owe Toyota Motor Credit $3,000, $4,000, $5,000, or any other lender, consider how much risk you have, if the check for some reason isn’t good and you still owe a lender money, so you gotta make sure that gets handled.
3. That kind of releases your liability risk. So now the dealer has it, it’s his responsibility to make sure all the recalls are looked over and the car is safe to sell when he’s ready to sell it.

A lot of reasons to trade a car into a dealer not the least of which is time and money. And by the way, step one for most people when they’re first getting in the market, whether they wanna buy a new or a used car, is to look at their used car or the car they own right now, and which one they plan to trade, and try to figure out what’s it’s worth. The simplest way to do that is if you live in an area where you’ve got a CarMax, stop in. They’ve done a brilliant job of allowing people to come by, get a full appraisal on the car, and they’ll give you an offer good for 10 days on that car. Now you know where the baseline is, that’ll help you tremendously in terms of figuring out whether it’s time to trade, what you’re able to trade for, etcetera.

So, good luck and thank you from vinadvisor.

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vinadvisor