If you’re interested in buying a new or a “new to you” car and you already own a car, you probably wondering if you should trade-in your existing car as part of the purchase deal. First, you need to understand how a commercial seller determines the trade-in value of your car and what that number means to you.
The first thing you should do is look up the “book” value of your car. Kelley’s Blue Book and the NADA Black Book are available for purchase and online, and are the standard tools for determining car value. Be sure to take into consideration the exact condition of your car, including options and mileage. Most books list a base trade-in value and you add or subtract from that amount depending on the condition of your car.
Should you expect that the potential seller will offer you exactly the trade in amount you arrived at using the book value? Of course not – the seller will take other things into consideration as well, most importantly whether or not they think they’ll be able to sell your car for a profit. A lot depends on the type of business they have and the market for your particular car.
For example, if they already have five other cars like yours on the lot and haven’t sold one like it in three months, they’ll be less likely to offer you as much as you expect – or even accept your car in trade at all. On the other hand, if they already know they have a buyer interested in your car and can readily turn it over for a profit, they may offer you more to encourage you to close the deal quickly.
The seller will also consider the sales price of the car you want to buy. Car sellers are in business to make a profit, after all. They’ll be looking at their overall profit on the car purchase, and if they’re making less on one aspect of the sale, they’ll be expecting to make up for it with more profit on another aspect of the sale. Therefore, it’s to your advantage to get the best purchase price for the car you want to buy before you begin negotiating the value for your trade-in.
Another important thing to keep in mind is what the trade-in value of the car means to you. First, it represents a reduction in price on the new car. You must weigh that against the value of continuing to own that car. If you have an older car that has a lower trade-in value, but you know the car to be a reliable source of transportation, the car may be more valuable to you as secondary transportation than as a means for lowering the purchase price of a new car. Or, you may want to sell the car yourself and use the profit you make as part of a down payment on a new car. Only you can determine which of these scenarios is most advantageous to you, so consider your options carefully before heading into the dealership.
