When purchasing a car from a dealership, the buyer will often have the option to trade-in their current car. The dealership effectively offers the buyer a certain amount for the trade-in car
against the cost of the car that is being purchased.
How trading in compares to selling your car privately
The advantages of trading-in
When trading in your car to a dealership the process of moving your car on is quicker and easier, as both the buying and selling transactions are concluded with the same car dealership. The time and stress associated with private sales is negated.
The disadvantage to trading in
Trade-in offers from dealerships are often considerably lower than the price which could be obtained through selling the vehicle privately.
How your trade-in vehicle will be assessed
The condition of the vehicle
An appraiser at your selected dealership will value your car based on its general physical condition, looking for signs of wear and tear or neglect, and how well-kept or clean the car is. Here, first impressions are vitally important that's why investing in a proper valet beforehand to make it as clean and presentable as possible is always a good idea.
The make and model of the car
The appraiser will consider the popularity of your car's make and model in the current market, the mileage based on the age of the car as well as body colour, standard features and optionally fitted extras. The dealer would be less likely to take on a model that will prove difficult to sell. Popular models will fetch higher average prices than undesirable models from obscure manufacturers with an unproven track record.
Service history and maintenance
A well-maintained car with a proven full service record (by the authorised agents) will count for a lot when determining the price for the trade-in. This is a vital marketing point for the dealer when they advertise the car to sell it on.
The pricing of the trade-in
Why you are offered less than market value'
The price you are offered will generally be quite a bit less than the actual value of the car as the dealer has to cover its overheads and make a profit when moving it on. Before doing so, the dealership will invest in a good clean-up, repair of any marks and scratches on the body, glass and wheels, attend to any mechanical issues, and probably service it in addition to adding new cosmetic items such as a fresh set of tyres. The dealership will want to make the car a presentable as possible to prospective buyers.
Trade vs. retail price
The price you are offered on your trade-in is known as the trade price; the price it is eventually sold for by the dealer is the retail price. Both of these are determined, within certain margins and as dictated by the criteria mentioned above condition, mileage, and popularity. These values are taken from the so-called Blue Book of car values as published locally by Mead & McGrouther. This guide is not generally available to the public, but used extensively by the used car industry and dealers. The retail price is the one you could have gotten had you sold privately.
Don't be shy to shop around
Before you even go to the dealership, check on the internet for the going price of models similar to yours and be prepared to negotiate upwards the dealer will offer as little as it can reasonably get away with. Don't hesitate to get more than one opinion shop around at other dealers.
What if I still owe money on the trade-in?
If you sell your car
to the dealer outright, the dealer will settle any outstanding amounts first and pay you the balance, should there be any left. If you trade in your car on another, more expensive model at the same dealership, the dealership will treat the trade value of your car as part-payment on the new purchase. The same procedure will apply outstanding monies to third parties are settled first, the remained will be regarded as a deposit and you will be liable for the balance of the new purchase, either through finance or cash.
What is an HPI check?
One of the first things the dealer will do is to perform an HPI check to determine if there are any outstanding liens or monies owed on your car a lease or hire purchase agreement, or private loans registered at a bank. This will be done as a matter of course, regardless if you state that the car is paid for and there are no liens against it.
While you will generally get more money by selling your car privately than trading it in at a dealership, the peace of mind and simplicity of trading it in often out-weighs the hassle of trying to sell it privately.