By manybanking.com Staff
If you’re in the market for a new or used car, deciding what to do with the car you are currently driving is harder than ever.
Like many industries in America, the auto industry is suffering. The poor shape of the economy has many people putting off buying a new car in favor of saving for the increasing likeliness of a rainy day. Consequently, U.S. auto sales dropped by 2.9 million between 2007 and 2008, a decline of about 18%.
Car values have declined along with car sales, including used-car values. According to used-car auction firm ADESA Inc., the average wholesale auction price for minivans is down about $1,000 from a year ago. What that means is that you may not get as much for your trade-in as you could have a year ago.
So should you trade in your car?
It depends. Regardless of what happens in the car market, you are always going to get the least money for your used car from a dealer trade-in. But, if you are buying a new car, you may be able to make up the difference by negotiating the price down on the new car. Additionally, there may get a tax advantage by using a trade-in to reduce the purchase price on a new car. To make an informed decision, you have to do some research to find out just what your car is worth in today’s prices.
Start with the Kelley Blue Book (KBB). This resource will give you a general idea of what your car is worth using year, make, model, features and condition. In ascending order, KBB will give you a trade-in value, private party value and retail value. Though, it’s important to remember that these values are only guidelines, because in today’s market, the value of your car may be much lower than what’s listed.
Next, do some research by searching online or checking out the classified section of your local paper to see what similar cars are selling for in your area. See how the numbers stack up to the private party value for your vehicle to get a general idea of what you could expect from a private party sale. Geographical location can dramatically affect the value of your car. For example, an SUV may be worth more in Minnesota where snow is often a factor than it is in Arizona. Conversely, a convertible may not be worth as much in North Dakota as it is in Los Angeles.
Finally, go to the dealership and see what you can get for a trade-in. Negotiate the price of the new car first. If the dealer asks, say you are undecided about the trade in. Then let the dealer make you a trade-in offer. If it’s not what you expected, try to negotiate. If you can’t get what you want from the dealer, consider selling it to a private party. At the very least, you can ask the dealer to hold your offer so you can “think it over.” From there, maybe try selling your car via Craigslist or another classified service. If it doesn’t sell, you can always take it back the dealer and trade it in.
—For more ways to save, spend, invest and borrow, visit MainStreet.com.