JelMAC’s Car Dealer Advice Blog

Why Getting Less For Your Trade-In Is A Great Deal
June 27, 2007, 9:53 am
Filed under: car buying, car buying advice, car dealer

There’s no getting around the fact that when it comes time to trade in a vehicle, customers are almost always underwhelmed by the offer the dealer makes on their car. One of the most popular objections in this situation is, “well I could sell it myself and get more money than that!”. Remember that dealers spend thousands of dollars in repairs, detailing, and advertising on your car once they buy it from you, so don’t ever think that dealers are just trying to scam you out of money. But that’s not what we’re here to talk about anyway; let’s talk about whether you can actually make more money by putting a For Sale sign in your car’s window.

Indeed, there is certainly the chance that you could get more money selling it yourself… but when you take on that responsibility, you have to approach it as a complete business transaction, and not just a price tag. When you add up all the debits and credits, it usually turns out that customers expend significant amounts of their effort and free time to sell their car, and worst of all, they actually make less off the sale than they would’ve gotten by going through the dealer.

Firstly- and most importantly- when you trade a car into a dealer and use it to offset the cost of your new purchase, you end up paying significantly less tax and finance interest on your new purchase. Let’s use an example where you’re buying a $30,000 car, and you’re trading in a car that you think you could sell yourself for $15,000, but the dealer is offering you only $13,000.

Let’s look at your purchase without your trade:

  • You’re buying a $30,000 car
  • Your taxes (New Jersey) on this vehicle are $2,100
  • Your interest on a $30,000 loan is going to be at least $5,000

Now let’s include your trade, at the dealer’s $13,000 offer:

  • You’re still buying a $30,000 car, but you’re effectively putting $13,000 down, so your new investment is actually $17,000
  • Now your NJ tax to be paid is only $1,200 (a $900 savings)
  • Your interest on a $17,000 loan is going to be more like $3,000 (a $2,000 savings)

With the discounts you get by going through the dealer, your car has actually made you $15,900 in this situation. So, do you still want to go sell that car yourself for $15,000?

This is before we even get into the fact that selling the car yourself means taking time out of your workday/weekend to communicate with potential buyers, having strangers visiting your house to look at the car, and spending your own money on advertising. These items add hundreds of dollars to your expense when you stop to think about it. And if it takes you 4 months to sell your car, guess what: it’s not worth what it was 4 months ago. So now you’ve lost even more money.

I know it’s the kiss of death when a car dealership tells you to trust them, but… TRUST ME. If you’re buying a new car and getting rid of an old one, it’s in your best interest to sell it to the dealer.

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