When ever we buy a car, a process known as “haggling” is set in motion. From a car dealer’s perspective, this process has two over-riding objectives:
a) To charge as much as possible for the vehicle they’re selling us, and
b) To pay as little as possible for the vehicle we’re trading in.
Our job in the exchange is to bring about the exact opposite outcome in both cases.
As simple as that may sound on the surface, making it happen is anything but! The dealer has the cars, the slick marketing campaigns, the fast talking staff and, in most cases, superior knowledge.
We can’t do much to counter their fleet of cars and in-your-face marketing, but one area where we can level the playing field is with knowledge, particularly as it pertains to valuations. Value is, after all, mostly a function of simple math that most of us can have even if we aren’t automotive experts. It’s often a matter of knowing where to find it.
If you know the value of the car you’re buying, and the car you’re trading or selling, you’ll know when it’s time to close the deal—or when it’s time to pick up and walk.
Get the value of both vehicles from a trusted third party source
Kelly Blue Book and Edmunds are two of the most widely recognized car valuation services, and you can get all the valuation information you need on either site. Both are free of charge, and you don’t need to set up an account or sign up to be on a mailing list.
Get prices of the car you’re interested in buying so you’ll have an idea of what the car should sell for, even with various options added in. You can do this from the comfort of your home without any pressure from a hovering salesman whose primary interest is converting you into his next deal.
You could check prices by calling or visiting various dealers in your area directly, but few will give concrete prices until you’re prepared to sit down and wheel and deal to the bitter end. And then any number you get prior to sign off by the store manager will be nothing better than a rough guess.
Also, work up the value of the car you already own. You’ll at least need this in order to negotiate a reasonable trade-in from the dealer. And it’ll be even more important should you decide to take matters into your own hands…
Sell your old car direct
A while back we covered the importance of having your down payment ready before you buy a new car, and the point is well worth re-emphasizing. The best way to do this is to sell your car yourself in order to maximize the amount of money you’ll get from it.
Put big, bold for sale signs in the windows of the car. Post it on the bulletin boards at work, at church and in any local retail establishments that will allow it. Advertise it on Craigslist, in your neighborhood newsletter or any other free or low cost advertising media. If you can’t sell it yourself, try selling it to Carmax. They probably won’t offer you top dollar, but they’ll generally offer you something better than a dealer trade-in, and—very important—with no strings attached.
The valuation services listed above provide three values: trade-in, private party and dealer retail. “Trade-in” is the lowest, and this is the range where the car dealer will be targeting should you decide to turn the car in for what ever they’ll give you. Chances are better than even that they’ll offer you even less, or as far down as they can get before you threaten to walk.
“Private Party” is the approximate price you should expect to get should you sell it yourself. At the beginning, price it a bit higher than the given value from Kelly Blue Book or Edmunds and be prepared to negotiate.
Dealer retail is the highest of the three values given for your car, but it’s highly unlikely you’ll succeed in selling it at this price. It is the price the dealer is likely to sell your car at to another buyer, regardless of how little he paid you for it. However, selling cars is his business and he’s probably a lot better at it than you are, which is why he’s able to get a premium price.
Critical caveat: if research into the value of your current vehicle indicates that you are “upside down” on it – meaning you owe more on the car than it’s worth—you shouldn’t even be looking for a new car. Put the new car bug back in the cooler, spend some time paying down or (better) paying off the loan on your car, then come back into the market when you have some equity established.
Forewarned is forearmed when buying a car, and the more you know about how much your current car and the one you are buying are truly worth, the better your chances of getting a fair deal both ways.
Do you do your homework by researching values before buying a new car, or have you mostly relied on dealers’ representations?