By Eric Peters, Automotive Columnist
Out with the old, in with the new — but what to do with your old car? Should you trade it in? Or sell it yourself?
There are pros and cons to each approach.
Most people trade-in their old vehicle because it’s generally the fastest, most hassle-free way to get rid of it short of just giving it away. The dealer handles all the paperwork — and you get money in your pocket or applied to your new car purchase. Simple and easy.
The big downside to trading in is that you will usually (no, always) get less money than the vehicle is actually worth on the retail used car market.
Sometimes, a lot less.
The dealer will typically offer a trade-in credit toward the purchase price of your new car that’s equivalent to the wholesale value of your old vehicle as reflected by current used car pricing guides (NADA, Kelly Blue Book, etc.) adjusted to reflect the specific condition/mileage of your particular car. There is usually a substantial difference — 20 percent is typical – between wholesale vs. retail values. If the dealer gives you, say, $8,000 credit for your trade-in, don’t be surprised to see your old car the next week on his used car lot with a $10,500 window sticker on it.
However, don’t look upon this as a rip-off. At least, not a complete rip-off.
The dealer is entitled to make money — and it does cost him to clean-up your trade-in and make necessary repairs (all cars sold by a dealership must pass state safety and emissions inspections in most states and this sometimes means mandatory brake work, new tires or exhaust, etc.). He must also put it on his lot, market it, and pay his sales staff to sell it. If he gave you the retail value of the car at trade-in time, he’d never be able to recoup these costs and would soon be out of business entirely — or at least not able to accept trade-ins at all. A good bit of the money he makes off your car — and which you, in effect, are paying indirectly — amounts to a service charge to dispose of it for you. You get to hand him the keys and drive away in your shiny new ride; he gets stuck with your old beater — and has to deal with the tire-kickers, paperwork and hassle.
There is one big potential rip-off to watch for, though.
A popular shuck and jive used by some new car salespeople is to offer what appears to be a spectacular price for your old clunker — which makes you happy and distracted. Then they goose the price of the new car while you’re mentally counting all the cash you think you’re making on the trade. To avoid getting stung by this scam, never discuss your trade at all until after you have negotiated and agreed upon the sales price of the new vehicle. Once that’s settled, you can bring up your trade. The salesman may not like it, but it’s a smart move for you.
Also: Find out what the approximate fair market price (retail and wholesale) of your make/model/year vehicle is. This information can be culled from used car value guides (NADA, Kelley Blue Book, etc.) that can be purchased at any large bookstore or simply looked up online. The NADA site is www.nadaguides.com and the Kelly Blue Book site is www.kbb.com.
The guides will tell you how to estimate the fair market value, adjusting for such things as mileage, condition and options, etc. If you know your old car is worth about $5,000 retail, you won’t get shucked and jived into accepting a $2,700 trade in offer.
Selling It Yourself
Selling your old car yourself, on the other hand, has its own upsides and downsides.
On the upside, you’ll usually get more money — the retail price vs. the wholesale price the dealer would offer. This can amount to several thousand dollars, depending on the car. In effect, you are paying yourself to clean-up/fix-up and market and sell your old car.
Which brings us to the big downside of selling your old car yourself: Cleaning up/fixing-up your old car, placing classified ads, talking with potential buyers on the phone, spending time arranging for people to come and see the car, dealing with those people — and finally, dealing with the paperwork that attends the actual transaction.
You’ve got to ask yourself one question. Ok, maybe two or three.
First, are you able and willing to clean up/fix-up the car yourself? If you expect to get top dollar, the car will need to be cosmetically presentable (clean, at least) and in overall decent shape. Do you know how to wash/wax/detail a car? Can you fix whatever minor things need fixing yourself? Or will you need to pay someone else to do these things for you?
Second, are you ok with the aggravation of late-night/early morning calls — and waiting around the house to show the car to people? It may take several weeks (maybe months) to complete the transaction. For some, this is an ordeal; for others, a couple of Saturdays spent with tire-kickers and no-shows is ultimately worth it when the car is finally sold.
If you do chose to sell your old car yourself, preparedness is the key. Here are a few things to get in order before you get going:
1) Determine the fair market price, using the value guides mentioned in Part I.
Be realistic. Do not overprice the car; unless it’s a very rare/unusual model, it probably won’t sell and you’ll have to go through this all over again. It’s ok to pad the asking price a little, however, because everyone expects to haggle, and you’ll probably end up knocking down the asking price regardless. A few hundred bucks of “wiggle room” is ok — and expected. If you want to get, say, $8,000 for the vehicle (and assuming that’s in the fair price ballpark for the make/model/year, etc.), it’s reasonable to ask $8,800 or so — understanding it’s negotiable.
2) Clean up the vehicle, inside and out, so it looks as presentable as possible.
The dealer calls this “detailing.” Professional car sellers know the importance of appearances. A clean, shiny car will almost always sell faster and command a better price than an otherwise identical car that’s unwashed and dirty-looking — even if it has lower miles and is actually in better physical condition. An afternoon spent washing, waxing and vacuuming can pay big dividends.
3) Consider fixing any many major, obvious problems — especially those that affect the safety of the car, such as tires or brakes — before you put the “for sale” sign out.
The vehicle should be sound enough to safely test-drive — and ideally, ought to be in good enough shape to pass state safety (and emissions) inspection. Getting a fresh state inspection (and emissions, where applicable) should help sell the vehicle, because potential buyers will know the car or truck is ready to be put into service, and there won’t be any trouble getting it registered. Some states require a “passed” emissions certificate before new tags/registration will be issued.
4) Advertise and market the car effectively.
Newspaper classifieds are yesterday’s way of selling a car. Try CraigsList or Auto Trader online instead. The ad should be direct and have the following information: Make, model, year, mileage, major options (air conditioning, automatic transmission, etc.), color, and a succinct and honest description of its overall condition (“good shape,” “excellent,” etc.). If the vehicle is in poor shape, has faded paint or “needs work,” be honest and state this in the ad. The people who call are going to find out anyhow, and attempting to pull the wool over their eyes about major problems is a bad idea that could lead to trouble you do not want. Try to get the best pictures possible to accompany the ad by using (and knowing how to use) a good digital camera. If you aren’t good at taking pics or don’t have a good camera, find a friend who is and does.
5) Sell the car.
It’s up to you to make arrangements for people to come and see the vehicle — and also whether you’ll allow them to take a test drive. If you do, ask to see their driver’s license and consider writing down the information before you allow the car to be driven. Use your judgment; if the person who shows up seems suspicious or not “right,” be polite but do not allow them to drive your car. Be prepared to discuss the car’s features, equipment and history. Have any service records available to show.
6) Draw up a bill of sale.
This document should list the vehicle identification number (VIN; this number can be found on the title, or on a plate that’s typically located on the upper lefthand side of the dashboard) and also include the make and model — and of course, the sales price. Date the document. State that the vehicle is sold “as is” — so that any unforseen problem that develops later on is understood to be the buyer’s problem, not yours. Print your name and the buyer’s name; each of you sign the document. It’s a good idea to have a copy of the bill of sale for each party. The final step is to sign over the title; there is a box where the owner must sign so that the buyer can go to the department of motor vehicles and get a new title issued in his name. Don’t forget this important step.
7) Do not release the car or sign over the title until you have payment in full.
That means either in cash, or in the form of a cashier’s (bank) check or money order — in your hand. A personal check can bounce — and a promise to pay is only as good as your faith in the person making the vow.
The last thing to do is remove your license plates and any personal things from the vehicle. Never allow the car to be driven away with your old tags still on it. Acquiring new tags is the responsibility of the buyer — and you don’t want to be getting parking bills and/or photo radar tickets months down the road because someone else is driving around in your old car with your old tags still on it. Be sure you notify your local motor vehicle department that the vehicle has been sold.
If all the foregoing seems like way too much work, you could always just trade it in.