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When getting a new vehicle there is a laundry list of things that you have to know before you even consider walking in the door. Over the next couple of weeks, we will cover some of these basics to make sure you are more than prepared when you walk into the dealer to pick up your new ride.
For week one of this series, we need to figure out what we are going to do with your current ride. You have several options here.
But before you make any moves, you have to figure out what your car is actually worth. Your trade in value is key information that will and there are several sources you need to consider.
Research is going to be your best friend here. When appraising your vehicle, dealers use the current market value of your particular model. So knowing the same information as them is going to give you a competitive edge to get the best value for your trade in.
Even 30 minutes of research is going to potentially save you thousands. Think about that from an hourly rate, there isn’t much I’d say no to for $2,000/hour. Well, maybe a couple of things.
Start by checking the classified ads. Paper ads have clearly gone the way of the dodo, but online publications have become the lifeblood of the pre-owned market. Checking out some of the pre-owned websites where people can list their cars are going to give you an idea of what your model is going for. When searching, make sure you are as specific as possible. Make, model, trim package, mileage, year, even color are all important. If your current vehicle has any special features or options that were added, ensure you check that as well.
Location is important with this as well. A car that may go for one price in Crowheart, Wyoming may be a vastly different price than in San Francisco, California. A congested area where there is a lot of similar cars will force prices down. Places like Detroit, for example, will have a lower market value on American car just because of the pure volume of vehicles in the area. Area will affect pricing for special features as well. An AWD sedan isn’t exactly all the useful in Christmas, Florida (yeah, that's a real place). On the opposite spectrum, a convertible is going to be harder for an Escanaba, Michigan dealer to sell, and therefore won’t make as high of an offer on that trade in.
Once you have perused as many online car sales sites as possible and know exactly what your Red 2014 Ford Fusion Titanium with AWD will go for in zip code 48227, you’re ready to move to the next step.
Keep in mind that your trade in value will be slightly less than what the vehicles are selling for, but we will cover that down below.
The next step will be to check the online appraiser tools. These are web pages that use algorithms and data to appraise your vehicle's value to a fairly accurate estimate. Many dealers depend on these appraisal tools for their entire trade in appraisal, so knowing the value is an important step.
When entering the information for your vehicle, ensure that you are exact on all options and features. Just because you put the trim level in, does not mean you all the features your car is equipped with have been checked. Packages, options, and add-ons are important too and can increase your car’s value by thousands.
Like the name suggests, however, they are a tool, not a definitive answer. So remember to take it all with a grain of salt.
Now that you have a good understanding of where your cars fair market value lies, you can determine the trade in value. Unfortunately, trade in value is slightly lower than market value. The appraiser sites already do this math for you, but I always like to check my own math.
A good rule of thumb is the trade in value is typically around $2,000-$4,000 less than fair market value. The dealer is technically “buying” your trade in, and therefore, they also have to sell it, if they can’t see a large enough profit margin between your trade in value and what they can list the car for, they won’t take the loss. It's simply business.
To determine the trade in value, start with what you have found to be fair market value. Take away the dealers profit margins, typically they like to make around $1,000-$2,000 on any particular trade in. After this, reduce any maintenance, repairs, or reconditioning costs the dealer will have to spend. This ranges, depending on the condition of your vehicle. However, tires, brakes, oil changes, paint repair, body repair, etc; it all starts to add up. You may think your vehicle is perfect, but once it gets put under a microscope, some repair costs may start to show up, so be ready for that. If you have major damage or mechanical repairs that are needed, try and get an estimate for the costs before taking it to the dealer. Know the dealer's labor fees and estimated time for the repair. If the difference is significant, consider repairing the vehicle yourself before trading in.
Walking into the dealer with the knowledge on hand and ready to go is going to keep you ahead of the game. Learning your cars worthwhile sitting trying to make a deal is only going to result in you having to completely recalculate your entire plan. It doesn’t have to be that hard!
Know your cars fair market value. Get the trade in value. And walk out the door in a much better place than before!
Remember people, stay vigilant! If you need help, as always, you are welcome to give us a call at 1800CarShow. All of our specialists will be happy to help, just let them know Jakob sent you, and they will take great care of you!
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