What should I know about trading in my car?
We get it - you want to get rid of that old clunker with minimal effort, energy and fuss, while at the same time buying a new one. Car dealerships make it convenient to walk in and sell one car, while walking out not long after with a totally new one. It’s called trading in, but there’s a few things you should know before jumping in head first.
1. Take care of your car and address issues
Like with any car sale, you’re probably going to get a higher price and make the sale easier if your car is in good condition. This includes not just cosmetic things like cleanliness, but deeper issues like paint, scrapes and so on. However, if the aim of the game is convenience, then car dealerships accept your car in almost any condition - just be aware you may not get the best price for it, and any fault could be used as a bargaining chip.
2. Know the market
The car market in inner Sydney might be a bit different to Darwin, for example. While you’re probably not going to travel across the country just to sell a car, a top-spec V8 Toyota Landcruiser might get a better trade-in price in the country than in the city. Like pretty much anything, the market also fluctuates. 2020, for example, was a bumper year for used car prices.
According to Moody’s Analytics, prices for used SUVs and utes were as much as 40% higher than they were in 2019. There are various explanations for this, but before you rock up to a dealership, do a little bit of market research so you’re not going in blind. Which brings us to the next point…
3. The make and model matters
SUVs and utes are all the rage right now. Everyone wants to ride a little bit higher, or be able to tow something, or put some fishing rods or dirt bikes in the back. According to the Federal Chamber of Automotive Industries, as many as three-in-four new car sales in any given month in 2020 were either a ute or SUV.
While a dealership will probably take your 15-year-old sedan, be aware that they are subject to supply-and-demand economics too. If there’s no demand for your sedan, you might not get the best price possible.
In the same vein, trim level matters here, too. Is your car a base model, or one with all the extra goodies? Safety tech and technology has come a long way in the past 5-10 years. If your car is a base model from a decade ago, it might not have what are considered the basics in a new car today - Bluetooth, parking sensors, the best safety features and so on - so you might have to adjust your price expectations accordingly.
4. Consider the dealer ‘incentives’
Dealerships love hanging onto their money, like anyone. Generally speaking, they’ll be much more likely to throw in paint protection, window tint, and other stuff on your new car, rather than give you a better price on your trade-in. If you are going into a dealership, you will have to be prepared to haggle a bit to pry every last dollar from their clutches. This is where car buying services like OnlineAuto.com.au can come in handy, for example. A car buying service sources fleet pricing on the new car, while also negotiating trade-ins on your old car.
5. Know the value of your car and the car you’re buying.
This is a bit of a no-brainer, and is probably the most important point. No one likes the feeling of being ripped off. But at the end of the day, a dealership’s trade-in convenience could come at a price. Selling your car privately is almost always going to yield a better price, but your car could potentially be on the market for weeks. Plus, you have to run around dealing with tyre kickers and getting roadworthy certificates, registration transfers, and so on.
A dealership does away with a lot of this hassle, but at the same time, you don’t want to be a doormat. There are various sources out there that can help determine the fair value of your trade-in - Redbook.com.au is one of them, but note it’s a guide only. Similarly, your old vehicle is only half the equation - getting a good price on the new car is the other. It’s no use getting $1,000 more on your trade-in if the new car is being sold at full retail price. Barring some rare or in-demand models, there is pretty much always room to move in price on a new car.
6. Consider the finance and loan options
An open secret among dealerships is that they don’t usually make a lot of money on the car price itself. Where they make money is the finance.
Dealerships often have partnerships with lenders and make some commission off every car loan sold. It’s all too easy to source dealership finance as you can trade-in your old vehicle, get the new vehicle, and get a loan all in one place.
However, convenience, again, often comes at a price. Dealership finance might not offer the most competitive interest rates, or flexible loan arrangements. If you need to finance your new vehicle purchase, it’s wise to shop around for a loan that suits you.
If you’re ready to finance your new car, speak with one of our lending specialists today to find out how you can get pre-approved for a car loan.
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About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
