Imagine that you’re on the lookout for a new car, which more than two million people in the UK do every year, according to Statista. What’s your first port of call? It’s to trade-in your old car and use it as leverage to reduce the costs of your new vehicle. It’s a tried and tested method that a plethora of people use, so it doesn’t seem out of the ordinary.
In many ways, it isn’t abnormal or unusual. A trade-in does what it says on the tin – you exchange your asset for a different one. Simple. However, it’s not as straightforward as it appears. While there’s nothing harmful with going down the route well-travelled, it does have its downsides.
You should always consider the pros and cons before signing on the dotted line. Sadly, too many motorists choose the path of least resistance as they believe it’s the best option without doing any research. If you do the same, you could do everything from agreeing to a bad deal to leaving money on the table.
Is that better than the hassle of doing it yourself? It’s a personal decision, one you’ll have to make in the not-too-distant future. But, here is a selection of the reasons you might want to think twice.
You Get Less Money
There are several reasons why this is the case, yet the most important fact to keep in mind is that a trade-in or part-exchange is bad for your bank balance. This is because the Money Advice Service says that a private sale commands up to 15% more than any other type of transaction, which is a lot of money, especially for an “asset” that depreciates.
Sure, it’s tempting to think that the extra 5% or 10% isn’t worth the time and energy that you have to invest to get the deal over the line, but you’d be mistaken. Although a trade-in is probably the simplest method at your disposal, the likes of Sell My Car Direct make finding a buyer easy. With a few details, you can have a quote in minutes and cut out the middlemen.
Of course, there’s nothing wrong with the old-school methods, either. For instance, people still respond to adverts in local newspapers (you can put them online, too) and “for sale” signs on windscreens. 15% might be the equivalent of a couple of hundred pounds, so it’s worth considering your options.
It Is On Finance
You don’t have a legal obligation to clear the amount you owe before trading it in, but it’s smarter to do it than to take the risk. The reason is simple – the exposure is yours. After all, your name is on the written documents with the finance company, and your details are on their system.
Therefore, there is only one person they will call if they don’t receive their monthly payment. When you trade-in a car that is on finance, you take a huge gamble since you are trusting the dealer to keep their word. There is nothing to say they will stab you in the back, yet there’s no reason to take a risk, either.
You could try and get everything down in writing. However, even that wouldn’t be enough, not unless it is done through legal channels. Of course, neither party wants to do this since hiring a solicitor is costly and negates the whole point of a quick sale.
As a result, it’s better to wait until the vehicle is free of finance before you think about selling it. It might sound obvious, yet with Finder reporting that 20,000 motorists use finance a year, it’s not beyond the realms of probability that you fall into this category.
Brand Loyalty Is Costly
You are loyal to a brand because your old car was brilliant, so you expect the same make will be made to the same standards. However, the issue is not with the quality, but with the extra money that you pay for your loyalty. Trade-ins thrive off this fact as it encourages sellers to swap old for new.
Consider you have a BMW i3 and need an upgrade. The new Leaf model will stand out to you because it’s related. Unfortunately, it is expensive, regardless of whether you knock money off by trading in your vehicle.
Certain brands are cheaper. For example, This is Money points out that Japanese manufacturers such as Nissan and Toyota are famed for their high-quality and low prices. As a result, you could make a bigger savings if you can separate yourself from your current car.
This is challenging when you’re trading it in as it’s part of the process. As soon as you go into a dealership, you’ll have a particular manufacturer in mind, rather than focusing on the dealer’s inventory.
It Says A Lot
The first rule of car negotiation is to keep your cards close to your chest. When the sales rep can’t guess what you’re thinking, they don’t have any leverage. And if they lack leverage, you have the upper hand. A trade-in wipes away this advantage in a split second as it tells the buyer you want a quick sale.
Straight away, this gives them an advantage. Even worse, you don’t even realise it because you’re concentrating on exchanging your vehicle for an upgrade. Opting for a trade-in plays into the dealership’s hands, yet this doesn’t have to be the case.
For one thing, you can think about trading in your car without saying it out loud. Check the prices first, and calculate what they are willing to pay. Better yet, get the information from the horse’s mouth by asking how much they will buy a used car for. Then, when it comes to a trade-in, they have no excuse to lower their offer.
Car salespeople have plenty of tactics they hope you don’t know. Thankfully, you can learn more about them by reading this Bankrate post and swatting up before haggling.