Everything you need to know about buying and selling cars online
Here are some easy ways to find out how much your car is worth.
problem solved
This column mainly deals with car purchases. But there’s another half to the equation, and it’s just as important. Trade-in.
Let’s take a look at trading in your old car. Before understanding how much it’s worth, the first thing you should ask yourself is, “Should I trade?” Simply put, you can get the most money by selling your current car yourself. If you go to Kelley Blue Book, you’ll see that private party value is always higher than trade-in value.
But there’s a catch. Selling a car yourself takes time. It requires a significant investment of time and energy. You need to clean the car and make sure it is mechanically sound. Then you need to promote it, answer all calls, texts, emails, and meet with potential buyers. If you’re a woman, meeting strangers to show you your car always carries a certain amount of risk. We recommend meeting in a public place where there are a lot of people around, or bringing a friend with you.
And some people waste their time. People say, “I have $3,000 today, but next week my uncle is going to give me the money he owes me, and I’m supposed to get paid the following week. Can you keep my car until then?” No, you can’t.
So you’re going to know something that every car salesman knows. Selling a car is a tedious task. Sure, you can always get more money if you sell your car yourself, but there’s a trade-off in terms of time and energy you spend. What’s more important to you? It depends on your priorities.
Determine the value of your trade-in
The next step in trading in your car is determining its value. You can guess or derive numbers out of thin air, and many people do that. Or you can also use something like motor trendIt’s solid What is my car worth? tool. There are many trade-in appraisers, but my favorite is motor trend This is because we use data from Black Book, which is used by most car dealers.
However, it is important to realize that online tools are only as effective as the information they provide. The rule is “garbage in, garbage out.” It doesn’t help to say there’s no damage to the car when there is clearly damage. If your car is 10 years old and has 87,000 miles, saying it’s in “like new” condition won’t help you. As soon as the dealer sees it, and they need to see and drive it before they can put a firm number on it, they will look at the actual condition and deduct what you left out. The more honestly you answer the questions, the more accurate the numbers will be.
A word about CarMax. Many people like to take offers from CarMax because most dealers respect it. But, as always, there’s a catch. There are actually two. First, Carmax won’t necessarily give you the full amount if you receive an offer online. Even the CarMax staff will have to see your car in person, and that’s where point deductions begin. Second, Carmax offers don’t last forever. Valid for only 7 days. If you got your CarMax appraised in February and waited until April to trade in your car, forget about it. If you have put 2,000 miles on the car since the offer was made, the offer is no longer valid.
the biggest mistake people make
The biggest mistake people make when trading in a car, and I see this over and over again, is believing that they should be able to get back what they owe on the car when they trade in the car. I can’t say this too loudly, but the amount you owe on a trade-in has nothing to do with the value of the car. period.
If your car is paid off and you have no debt, does it have zero value? Of course not. If I owe $12,245, is it worth $12,245? Maybe. Probably not. It might only be worth $9,000. Or it could be worth $13,000. It all depends on one thing: fair market value. But time and time again I hear people say they want a return on their trade. I asked one woman why. she said: “Because we don’t want to have negative equity.” Well, no one wants negative equity. However, if equity is negative, capital is also negative. The only way to avoid that is to pay cash or lease instead of financing, or put down enough money to cover the negatives.
appraisal of silence
When you go to a dealer, no matter how much research you do or how realistic your numbers are, the dealer is playing the game with you. And the number one game they play is called “Silent Appraisal.” The salesperson will take you outside and stand nearby to look at your car. Sometimes he stops and touches something on your car…and doesn’t say anything. This is your cue to spout derogatory information about your profession. “Oh yeah, my wife gave me that scratch. I forgot. She was backing into the garage and hit our kid’s bike.”
The purpose of silent appraisal is to use your own words and reactions to devalue your transaction. The way to deal with this is to not say anything when the salesperson bends down and touches any part of your car. Please ignore. It’s all part of the game. Why do salespeople play this game? Because, let’s be honest, our customers are playing the game with us. First and foremost, they don’t tell you the whole truth about their cars. When you ask if there’s a problem, most people won’t reveal that they were told by the transmission shop a week ago that they needed a new transmission. They say, “No, it’s okay!”
Pro tip: Don’t clean it.
Sometimes customers bring in their shiny new cars for trade-in. That’s because they just spent a weekend explaining the details because they thought it would help them get more money. Please don’t do this. Nothing says “a customer eager to sell” like a car that has just been meticulously serviced. Leave dog hair, food wrappers, and mustard stains on the sheets. Then say something like, “Oh, my car is a mess. I wasn’t planning on trading it in today.”
Don’t parachute your trading
Finally, the oldest trick in the book, but it almost always backfires. You go to a car dealership, choose a car, haggle over the price, spend all the money you made on the deal, and then innocently look at the salesperson and say, as if you just had an idea. “As you know, I wasn’t planning on trading in my car, but it’s parked outside in the parking lot, so could you take a look at it and let me know how much it would cost?”
In business, this is called a “trade parachute drop.” The reason people do that is because decades ago some idiot (sorry, self-proclaimed expert) started telling people to first negotiate the price, then the deal amount.
Don’t you think it’s a good strategy? it’s not. Here’s why: If you break the dealer’s bank on price, the dealer has nothing left to offer in the deal. Actually, what do you think they’re going to do? They are going to take advantage of the opportunity you have given them to recoup some of the money they lost. They are going to hold you back from trading. Instead of offering something of real value, they’re going to give you a couple grand less. By being dishonest with the dealer upfront, all you’ve really done is hurt yourself.
The secret of trade-in value
The secret to getting the most profit from trading is simple, but difficult to implement. It starts with buying wisely. Find a reliable car that will hold its value and buy it for the lowest possible price by paying cash, leasing, or financing it. If you can afford it, put at least 20% down and finance within up to 36 or 48 months. Don’t finance your car for 6 or 7 years. This almost guarantees negative equity. Don’t focus on getting the lowest payout. Instead, focus on paying it off as soon as possible and leveling the playing field. Lastly, make sure to maintain it properly. Ultimately, that’s how you maximize your trade-in value.
Photo credit: Getty Images
