How to buy a new car with a trade-in.

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protagonist
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How to buy a new car with a trade-in.

Post by protagonist » Thu Nov 09, 2017 1:54 pm

This old thread proved extremely useful the last time we purchased a car: viewtopic.php?f=11&t=124638

However, now I want to buy a new car and want to trade in an old car. The old car has issues that will reduce its value. How should I adapt that strategy to buying a car with a trade-in?

If I wait until I get my best quote via the internet using the strategy outlined in the bogleheads thread above, the dealer may low-ball me on the trade-in.

And if I go to dealers with my trade-in car first to see what they will offer, they may not make an offer until the price on the new car is negotiated, and even if they do I would then forfeit the benefit of internet negotiation.

Any suggestions as to strategy?

Thanks.

Globalviewer58
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Re: How to buy a new car with a trade-in.

Post by Globalviewer58 » Thu Nov 09, 2017 2:08 pm

The best deal is to treat these as 2 transactions but this requires a bit more work on your part.

Some dealerships need used cars and will purchase the vehicle from you even if you do not plan to buy a car. One that comes to mind in our area is AutoNation. Ask them for an offer. Experience tells me they do not negotiate. You will have trade-in values and private party transaction prices in hand before going to the dealership to negotiate. If they lowball then that dealer likely doesn't see a need for more used cars at the moment. You may need to advertise for private party sale which requires more effort on your part. But if you never get an acceptable offer then go back to a dealer to sell the used car.

On the new car negotiate the best deal on the specific car you want. On our last purchase they lowered the price if we took the financing. Two months later the loan was paid off with no prepayment penalty. The prior thread you mention has great tactics to employ.

warner25
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Re: How to buy a new car with a trade-in.

Post by warner25 » Thu Nov 09, 2017 2:17 pm

Yeah, I think you lose with a trade-in. Separate the two transactions. Get a written offer from Carmax to buy the old car, and then put it on Craigslist for a week to see if anybody will pay more. If you don't get any buyers, sell it to Carmax and be done. I don't think you'll do any worse than trading it, and you'll potentially do much better. If nothing else, it makes the price negotiation for the new car much more simple and transparent. It also lets you cast a very wide net by email without ever stepping into a dealership (as would be necessary so they can evaluate the trade).

For reference, last time I sold a car (12 years old, 175k miles, but no real issues), Carmax offered $1,800 and I ended up selling to someone through Craigslist (actually the first person who wanted to look at the car) for $3,000. It was well worth the minimal effort.

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Raymond
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Re: How to buy a new car with a trade-in.

Post by Raymond » Thu Nov 09, 2017 2:24 pm

I separated the two transactions earlier this year - sold my old car to Carmax (although you might find it worthwhile to sell it yourself), and bought a new car elsewhere.

Less chances of dealer shenanigans this way.
"Ritter, Tod und Teufel"

pshonore
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Re: How to buy a new car with a trade-in.

Post by pshonore » Thu Nov 09, 2017 2:26 pm

Recently went through this. Got a Carmax price for my trade. Went to dealer, got a fairly decent price on the new car but they offered $2500 less than Carmax for the trade. No deal there. Also be aware that if you trade, you generally get a credit for the trade in price on sales tax and property tax (depending on your state). In CT that works out to about 8 - 10% of the trade value.

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TomatoTomahto
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Re: How to buy a new car with a trade-in.

Post by TomatoTomahto » Thu Nov 09, 2017 2:29 pm

In NJ, you pay sales tax on the net (I.e., new less trade in) cost of the car. That’s a savings of 7% if you trade it in at the place you’re buying from. That should be factored in.

ETA: posted after pshonore

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DaftInvestor
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Re: How to buy a new car with a trade-in.

Post by DaftInvestor » Thu Nov 09, 2017 2:30 pm

To me its not worth the effort/hassle of selling a used car myself. I did it once - had to deal with a lot of shady people - won't do it again.
You have to accept the fact that the dealer will NOT give you the same price that you can get from a private party. What I usually do is print out KBB pricing and bring it with me. After I negotiate the new car pricing I tell them what I want for my trade-in and spend time negotiating that. I have always been successful getting the "wholesale" pricing printed from KBB's webiste (If you sell to a private party you can try to get the retail pricing listed). They definitely start by trying to low-ball but will negotiate because they will still make money on the trade-in car and don't want to lose you on the new car.

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DaftInvestor
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Re: How to buy a new car with a trade-in.

Post by DaftInvestor » Thu Nov 09, 2017 2:34 pm

warner25 wrote:
Thu Nov 09, 2017 2:17 pm
For reference, last time I sold a car (12 years old, 175k miles, but no real issues), Carmax offered $1,800 and I ended up selling to someone through Craigslist (actually the first person who wanted to look at the car) for $3,000. It was well worth the minimal effort.
Sounds like you got lucky! Or maybe you had a car that was in high enough demand in your area. With me - it took several weeks and having to deal with dozens of people who were looking to try to get the car for cheaper than the dealership would have given me on a trade-in. I ended up only get a minimal amount over what the dealership would have given me on the trade-in (but even if I had gotten the additional $1200 you got - it wouldn't have been worth it to me) - I will never do it again.

protagonist
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Re: How to buy a new car with a trade-in.

Post by protagonist » Thu Nov 09, 2017 2:44 pm

warner25 wrote:
Thu Nov 09, 2017 2:17 pm
Get a written offer from Carmax
Interesting.

How is Carmax different than any other dealer?

I have a 2006 Honda. It failed inspection. The engine light stays on. It is perfectly driveable (I have 60 days on the failed inspection) but it has an issue that is too expensive to be worth fixing.

I don't want to dump my problems on a private buyer, since fixing the car would cost more than it is probably worth.

delamer
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Re: How to buy a new car with a trade-in.

Post by delamer » Thu Nov 09, 2017 2:57 pm

protagonist wrote:
Thu Nov 09, 2017 2:44 pm
warner25 wrote:
Thu Nov 09, 2017 2:17 pm
Get a written offer from Carmax
Interesting.

How is Carmax different than any other dealer?

I have a 2006 Honda. It failed inspection. The engine light stays on. It is perfectly driveable (I have 60 days on the failed inspection) but it has an issue that is too expensive to be worth fixing.

I don't want to dump my problems on a private buyer, since fixing the car would cost more than it is probably worth.
Carmax will give you a written, 7-day guarantee to purchase your vehicle at the price it offers after inspecting it. Which is a very useful negotiating tool when you are haggling with the new car dealer.

protagonist
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Re: How to buy a new car with a trade-in.

Post by protagonist » Thu Nov 09, 2017 3:03 pm

delamer wrote:
Thu Nov 09, 2017 2:57 pm
protagonist wrote:
Thu Nov 09, 2017 2:44 pm
warner25 wrote:
Thu Nov 09, 2017 2:17 pm
Get a written offer from Carmax
Interesting.

How is Carmax different than any other dealer?

I have a 2006 Honda. It failed inspection. The engine light stays on. It is perfectly driveable (I have 60 days on the failed inspection) but it has an issue that is too expensive to be worth fixing.

I don't want to dump my problems on a private buyer, since fixing the car would cost more than it is probably worth.
Carmax will give you a written, 7-day guarantee to purchase your vehicle at the price it offers after inspecting it. Which is a very useful negotiating tool when you are haggling with the new car dealer.
Fantastic!

Then the best procedure (correct me if I am wrong) would probably be:
1. Go through the internet negotiating process all online as per the prior Bogleheads thread until I decide on my final offer
2. Then go to Carmax and get a written 7-day guarantee of a purchase price for my vehicle
3. Take it to the dealer where I intend to purchase the car, agree to the purchase, and if he does not agree to pay me more for my car than Carmax (factoring in the tax advantage of trade-in as per Tomato Tomahto above), buy the new car and subsequently sell my old car to Carmax.

Very helpful! Thanks!

warner25
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Re: How to buy a new car with a trade-in.

Post by warner25 » Thu Nov 09, 2017 3:11 pm

DaftInvestor wrote:
Thu Nov 09, 2017 2:34 pm
Sounds like you got lucky!
It did work out very nicely. But the time before that, I think I sold to the second person who came to see my car. Both cars were Toyotas in good shape, and this was a small town rural area where my listing wasn't swamped by hundreds of others, and that might be the difference. Surprisingly, I've actually found that trying to buy a car through Craigslist was significantly more painful (although not nearly as painful as buying from a dealership...)
protagonist wrote:
Thu Nov 09, 2017 2:44 pm
How is Carmax different than any other dealer?
I think the main difference is that other dealers simply won't buy your car. Dealers will take a trade-in if you're buying, but they won't make a no-strings-attached purchase from you.

RudyS
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Re: How to buy a new car with a trade-in.

Post by RudyS » Thu Nov 09, 2017 3:45 pm

warner25 wrote:
Thu Nov 09, 2017 3:11 pm
DaftInvestor wrote:
Thu Nov 09, 2017 2:34 pm
Sounds like you got lucky!
It did work out very nicely. But the time before that, I think I sold to the second person who came to see my car. Both cars were Toyotas in good shape, and this was a small town rural area where my listing wasn't swamped by hundreds of others, and that might be the difference. Surprisingly, I've actually found that trying to buy a car through Craigslist was significantly more painful (although not nearly as painful as buying from a dealership...)
protagonist wrote:
Thu Nov 09, 2017 2:44 pm
How is Carmax different than any other dealer?
I think the main difference is that other dealers simply won't buy your car. Dealers will take a trade-in if you're buying, but they won't make a no-strings-attached purchase from you.
Not universally true. Depends on location, and the car. Will also affect the price. But I wouldn't give up on that idea out-of-hand.

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jabberwockOG
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Re: How to buy a new car with a trade-in.

Post by jabberwockOG » Thu Nov 09, 2017 3:50 pm

protagonist wrote:
Thu Nov 09, 2017 3:03 pm
delamer wrote:
Thu Nov 09, 2017 2:57 pm
protagonist wrote:
Thu Nov 09, 2017 2:44 pm
warner25 wrote:
Thu Nov 09, 2017 2:17 pm
Get a written offer from Carmax
Interesting.

How is Carmax different than any other dealer?

I have a 2006 Honda. It failed inspection. The engine light stays on. It is perfectly driveable (I have 60 days on the failed inspection) but it has an issue that is too expensive to be worth fixing.

I don't want to dump my problems on a private buyer, since fixing the car would cost more than it is probably worth.



Carmax will give you a written, 7-day guarantee to purchase your vehicle at the price it offers after inspecting it. Which is a very useful negotiating tool when you are haggling with the new car dealer.
Fantastic!

Then the best procedure (correct me if I am wrong) would probably be:
1. Go through the internet negotiating process all online as per the prior Bogleheads thread until I decide on my final offer
2. Then go to Carmax and get a written 7-day guarantee of a purchase price for my vehicle
3. Take it to the dealer where I intend to purchase the car, agree to the purchase, and if he does not agree to pay me more for my car than Carmax (factoring in the tax advantage of trade-in as per Tomato Tomahto above), buy the new car and subsequently sell my old car to Carmax.

Very helpful! Thanks!

Correct. If you have a trade it is critical that you first get a written offer on the trade from another party so you understand exactly what the old car is worth wholesale.

Getting wholesale value on a trade-in is the very best you can hope to get from any honest dealer. A dealer that tells you he can give you more than wholesale value on your trade is going to jack you up on fees and other charges on the new car purchase to make up the difference. As other have posted always make a trade a part two portion of the transaction. When purchase a new vehicle negotiate only on the "drive out" price (total cost plus only tax, tag, title fee) of the new car and nothing else. Never negotiate or even talk about any other any misc dealer fees and charges - they are irrelevant and red herrings and the dealer can assign any value they want to these items they don;t matter. Negotiate only drive out price which equals total purchase cost plus tax, tag, and title fees (these fees are fixed and regulated by government ). Once you have a written agreement accepted offer for a "drive out" price then and only then ask dealer if they want to buy your trade if they are interested take it down to get appraised by the used car guys and if offer is acceptable have them take the trade off the cost of new car so you can save on the taxes. If they low ball you on the trade and won;t come up sell it somewhere else.
Last edited by jabberwockOG on Thu Nov 09, 2017 4:01 pm, edited 1 time in total.

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dm200
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Re: How to buy a new car with a trade-in.

Post by dm200 » Thu Nov 09, 2017 3:55 pm

Yes - there is the convenience or inconvenience difference between a trade-in and selling separately.

When you trade-in:

1. No transition problems between old and new car

2. No added costs of carrying two cars

3. In many/most states - you pay sales tax on the net of trade-in.

4. No risks of advertising, test drivers, getting the money, etc.

Make the new car deal forst - then ask for the trade-in value. Make decision.

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Earl Lemongrab
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Re: How to buy a new car with a trade-in.

Post by Earl Lemongrab » Thu Nov 09, 2017 4:55 pm

protagonist wrote:
Thu Nov 09, 2017 2:44 pm
I don't want to dump my problems on a private buyer, since fixing the car would cost more than it is probably worth.
As long as you're honest, that shouldn't matter. You don't know what the buyer might be interested in. They could be looking to part it out or they might be a shade-tree mechanic willing to fix the problem themselves.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

denovo
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Re: How to buy a new car with a trade-in.

Post by denovo » Thu Nov 09, 2017 4:58 pm

protagonist wrote:
Thu Nov 09, 2017 1:54 pm
This old thread proved extremely useful the last time we purchased a car: viewtopic.php?f=11&t=124638

However, now I want to buy a new car and want to trade in an old car. The old car has issues that will reduce its value. How should I adapt that strategy to buying a car with a trade-in?

I addressed trade-ins in that thread. Don't bother trading in cars to the dealer. Never a good deal. Go Carmax/craigslist. Keep negotiation solely on the price of the vehicle.
"Don't trust everything you read on the Internet"- Abraham Lincoln

denovo
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Re: How to buy a new car with a trade-in.

Post by denovo » Thu Nov 09, 2017 4:58 pm

Earl Lemongrab wrote:
Thu Nov 09, 2017 4:55 pm
protagonist wrote:
Thu Nov 09, 2017 2:44 pm
I don't want to dump my problems on a private buyer, since fixing the car would cost more than it is probably worth.
As long as you're honest, that shouldn't matter. You don't know what the buyer might be interested in. They could be looking to part it out or they might be a shade-tree mechanic willing to fix the problem themselves.


+1
"Don't trust everything you read on the Internet"- Abraham Lincoln

mak1277
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Re: How to buy a new car with a trade-in.

Post by mak1277 » Thu Nov 09, 2017 5:05 pm

Last time I bought a new car, the dealer offered to match whatever I could get at Carmax for my trade.

JBTX
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Re: How to buy a new car with a trade-in.

Post by JBTX » Thu Nov 09, 2017 5:30 pm

Years ago, I separated transactions, drove down the new car price, and then got whatever I could with trade in.

Now with internet pricing, you can go to a site like cars.com and autotrader and get a pretty good idea what both the new and old car are worth. Go back and forth with a couple of dealers on the new car. Look at like kind cars as your trade in and see what the price range is - obviously as seller you will have to discount that.

At a certain point get a range of what the difference i am shooting for, then go to the dealer and propose my difference, less maybe $2000 or $2500.

If you want to bother with selling your old car, you can, and in most cases you will probably get somewhere between $750 to $1500 more than if you took it to car max. Is it worth it? Judgement call. However, having the old car as trade in may help you get a little bit better than you otherwise would on the trade if you just walked up to the dealer and asked what you could get for it. On at least 2 different occasions, when negotiating the difference, when it got down to final numbers, it was typically the dealer going back to the used car buyer/dept and pushing them to up the value appraisal to work.

Last car I traded in a car that was literally in their shop, and required somewhere between $800-$4000 worth of work. They increased the trade allowance from about $3000 to about $4500, which I considered a huge win.

Also if you are in a sales tax state if you do it net, your trade in reduces your sales tax ...I think.

likegarden
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Re: How to buy a new car with a trade-in.

Post by likegarden » Thu Nov 09, 2017 7:36 pm

I bought a new Chevy which had a $26k sticker price. My 13 year old Buick had 110k miles and Edmunds or KBB thought it was between 750 and 1300 $ worth, and it was not worth to go via Craigs List with potential trouble. So I took $500 from the dealer for the old car and got a GM credit for $3.7k and 7% off the sticker price and was happy.

tibbitts
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Re: How to buy a new car with a trade-in.

Post by tibbitts » Thu Nov 09, 2017 8:12 pm

pshonore wrote:
Thu Nov 09, 2017 2:26 pm
Recently went through this. Got a Carmax price for my trade. Went to dealer, got a fairly decent price on the new car but they offered $2500 less than Carmax for the trade. No deal there. Also be aware that if you trade, you generally get a credit for the trade in price on sales tax and property tax (depending on your state). In CT that works out to about 8 - 10% of the trade value.
Some states not only don't give you that break, they don't give you a break for any discount you might get from book value on vehicles. :-(

tibbitts
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Re: How to buy a new car with a trade-in.

Post by tibbitts » Thu Nov 09, 2017 8:13 pm

Sometimes dealers won't take your old car - they won't offer you any price at all, even if they'll lose the sale on the replacement car. I wouldn't have believed that if it didn't happen to me.

protagonist
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Re: How to buy a new car with a trade-in.

Post by protagonist » Fri Nov 10, 2017 11:32 am

You wouldn't think that my car had a problem from driving it....it drives fine...but the engine light is on and it failed inspection based on a cylinder misfire.
I changed the spark plug myself and switched the ignition coils myself between the "bad" cylinder and a good one....same cylinder misfired.
So I took it to a mechanic I trust, who did a valve adjustment for $140 (Honda dealer wanted $600 for that). That did not solve the issue.
He told me that my valve was stuck and that I would need a new engine, which he estimated as a $4000-5000 job. I don't think he was trying to scam me into doing expensive work, as he himself told me that it probably was not worth it given that my Element is 12 years old with over 150K miles.

Under the circumstances I would rather just trade it in or sell it to Carmax, and take what they are willing to give me, than deal with the hassle of selling it to a private individual when it needs that much work.

I can still drive the car legally with a failed inspection sticker for about 6 more weeks, during which I need to buy a new car. I would like to choose a car within the next 2 weeks and then buy at the end of the month, when the dealers are pressured to make their quotas. I figure I will start the email writing process to several dealers around Nov. 24 or so to get the best deal.

sco
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Re: How to buy a new car with a trade-in.

Post by sco » Sat Nov 11, 2017 12:21 am

I would never tell you to make sure that engine light fails, before you traded it in..

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