Know a Car’s Worth before Selling Car Back to Dealership
Offering a trade-in to the dealership when buying a car can help buyers offset the cost of that new vehicle. However, that old trade-in also could boost the cost, if buyers still owe money on the loan. Dealers also could offer less than the car is reasonably worth.
Selling a car back to a dealership isn’t complicated, but consumers need to do their homework so they can better understand their car’s value before heading into the dealership to offer up a trade.
It’s a Seller’s Market! The Resale Market is On Fire Now
The computer microchip shortage has caused stress in the automotive supply chain. This means that there could be less inventory on vehicle lots and showrooms; while the chip shortage affects new models, the repercussions also have reverberated into the used/pre-owned market.
Demand for automobiles is high. Some consumers might want pre-owned or used models as they are more affordable. As demand has increased, though, it has put a crunch on supply. Some buyers also might be looking at the pre-owned/used inventory to find a model that closely resembles one that might be hard to find because of the chip shortage.
This supply and demand mismatch is a pain for buyers, but it also is a blessing for those who have trade-ins for dealerships. As demand is high, the value of used cars is increasing. This has translated to a better trade-in price for the consumer.
What Affects the Car’s Value?
Consumers who are in the market for a new (or new to them) vehicle and who will be trading in an older vehicle need to do their homework. Researching a car’s value before trading in is always beneficial to helping the consumer better understand their vehicle’s worth, but in today’s market, research can help buyers know their selling position.
While the sale price of cars is increasing, this doesn’t mean that every vehicle is going to be worth thousands of dollars as a trade-in. There are many factors that affect the resale value of a vehicle, including:
In addition, any remaining loan value on the car also needs to be deducted from the trade-in value. Unfortunately, some buyers could owe more than their car is worth.
Consumers also need to understand that they might not get as much from a dealership as they would if they sold their car privately. Dealers want to make a profit. If that trade-in is in fairly decent condition, the dealership could clean it up and sell it on their lot. This means, though, that a dealership will need a bit of cushion between what they buy the car for as a trade-in and what the dealership sells it for later.
Researching the Value of a Vehicle
Before offering up the older vehicle as a trade-in, consumers can uncover the value of their vehicle via Kelley Blue Book (aka KBB). The site is the gold-standard of vehicle values, and dealerships will consult KBB values to better understand the vehicle’s price, too.
When using KBB, car owners will need to enter all the major details about their vehicle. KBB will ask owners about the general condition of the vehicle, any upgraded features, the make/model, age, mileage, etc. Owners also can choose to enter their vehicle’s VIN or license plate data, too.
KBB will take owners through multiple screens to help determine the value. Remember to add in any additional features of the vehicle, as this could help bump the price. After all the data has been entered, KBB will show buyers their fair market trade-in value or possible sale prices for a private sale (car owners can select what value they wish to view).
KBB provides both an average price and price ranges to better guide consumers.
Knowledge is Negotiating Power
After researching their car’s value, buyers will be in a better position to negotiate with dealerships during a trade-in. Like many aspects of buying a car, the value of a trade-in might be a bit of back and forth between the dealer and seller.
What happens if the dealership offers a really low price on the trade-in? Consumers don’t have to accept the offer. This can be where negotiation comes into play. Bring in KBB values. Ask why the offer is so low.
Buyers always can opt to visit another dealership. The first offer might not be the best offer, and buyers can always walk away from a deal that doesn’t work for them.
When the Car is Underwater
The term underwater doesn’t mean that the car is flooded; this is a financial term meaning that the car is worth less than the amount owed. The equity in the car is negative.
When selling a car back to a dealership, this is not an ideal position. The result could be that the buyer goes into another loan upside down (or underwater). The dealership might buy the car as a trade-in, agree to pay off the loan and then add the difference to the loan on the new car.
The difference between the trade-in value and the loan balance basically gets shuffled into the new deal for the car.
Selling Car Back to the Dealership vs. Selling Privately
Car owners have two choices if they are interested in buying a new car and wish to apply the value of their old car toward that purchase. The car owner could sell the car back to the dealership or they could sell the car privately.
For car owners that want the least amount of hassle or responsibility, trading-in the car to the dealership might be the best option. However, selling the car privately also is an option. Selling the car also requires the car owner to research the value of their vehicle, but the resale value for a private sale may be higher.
To sell that vehicle, car owners will need to advertise their car. Ads will include pictures and sellers should disclose all issues of their car—both mechanical and aesthetical. If the air conditioner doesn’t work, note it! Dents, rust, ripped interior…photograph it!
Sellers also need to be safe. Scams are prevalent. Kelley Blue Book gives some tips: talk to possible buyers via phone, check the license before a test drive, meet them in a public place and take a friend along. When accepting payment, meet at the bank, use a reputable payment method or use a reputable escrow company.
In addition, sellers also should make sure their insurance covers another driver (for those test drives).
For many car buyers, selling a car back to the dealership via a trade-in is a great way to offset the price of a new car and get rid of the old car. However, car owners need to research the value of their car before visiting the dealership. Knowing the possible trade-in value of a vehicle can help buyers negotiate and get the best price for that trade-in.
While buyers also could elect to sell that car privately, this option isn’t for everyone. While car owners could get a higher price for their car (that they could apply to a new car), the process is a bit more involved. Sellers need to be safe and aware of any potential scams.