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.
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?
Good tips! Especially putting in the work to sell the car yourself. I hope to never need a car loan again, but for those who choose to go that route, this is good advice.
Khaleef – I agree with you. Both our cars are debt free, but we’ll be replacing one of them within the next few months. If we do take a loan, it will be small and short term. But we’re enjoying the debt free lifestyle at the moment and the freedom it brings.
A very timely article, as I am going through this process shortly. I will put these tips to good use! I never really knew about Edmunds until recently, and it gives a more realistic value for a car so you don’t get your hopes up too high and shoot yourself in the foot when trying to make a sale.
Jesse – These sources are invaluable. Let’s face it, most of us buy or sell a car only every few years which hardly puts us in a position to be experts. I’ll take all the help I can get in that department!!!
Kevin, You’re absolutely right, you must know the market value of what you’re buying and both Edmunds and KBB are great sources.
Truecar is a new player that is also worth checking out. They actually show you a fancy little chart that shows you what’s a bad, good, and great price and how you’re quote compares to that.
CNC – I hadn’t heard of Truecar, but thanks for bringing it up. We can all use all the help we can get!
Good tips. There isn’t much worse than going to a car dealer and “haggling” both on the trade in and the new car. I always feel like I’m getting a rotten deal, even if it is a decent one.
Jason – I’m with you on the rotten deal thing. Anytime I’ve been in a dealership I always have an all encompassing feeling that my pocket is about to get picked. Takes all the fun out of what should be a real adventure!
It scares me how many people go into a car purchase without knowing these things! Personally, when I walk in knowing what my car is worth and what the car I want is worth, I feel very confident and I quite enjoy the process of negotiating with the dealer.
Georgia recently enacted a new vehicle tax on private party used sales, which has made selling the car yourself much more difficult. Makes these sites listed much more invaluable!
Hi Blake – I live in Georgia, so I’m not pleased about that tax. But I agree, I can’t see how anyone goes into a car dealership without having a solid idea as to what a car is worth. They throw themselves on the mercy of the dealership then wonder why they had to pay so much for the car. There’s so much free information out there, it’s hard to believe anyone won’t investigate.