BUYING A CAR IN 2017
(WITHOUT HAVING HEADACHES IN 2018)
GETTING RID OF YOUR OLD VEHICLE
At this point, if you have decided on what type of new vehicle you are looking for, it becomes necessary to figure how to get rid of the old vehicle. Done correctly, you can maximize the money you receive from the sale of the old vehicle, and make the purchase of the new vehicle easier to afford.
If you are buying from an individual, you probably have no choice other than to sell your old vehicle yourself or take it to a consignment dealer, who will sell it for you in exchange for a fee, which is normally a percentage of the sale price. If you are buying from a dealer, you will probably be able to trade your old vehicle for the new one. There are a few dealers, like CarMax, who will sometimes offer to buy your old vehicle without a trade.
The question of whether to trade your old vehicle in or sell it yourself can be decided by several factors, including convenience, but as far as maximizing your total money outlay, you can decide by looking at the deal. Remember that the sales tax you will pay is based on the money that you actually lay out for the deal. Therefore, if you trade in your old vehicle, you pay tax on the difference between your trade in and the cost of the new vehicle. The trade numbers offered to you will include the value of your old vehicle plus the discount that the dealer takes off his new vehicle. Better to look at an example:
Suppose that you go to a dealership and find a vehicle to buy. The window sticker price for that vehicle reads $25,000. The cost to the dealer for that vehicle is $22,000, and the dealer wants to sell his vehicle for $23,000. You know that your vehicle would be worth $10,000 on his used vehicle lot or $9,000 if you sell it yourself. Since the dealer wants to profit from your old vehicle as well as your new vehicle, he may offer to trade you his new vehicle for $15,000 and your vehicle. It sounds like you are getting top dollar ($10,000) for your vehicle, but what he has done is value your vehicle at $8,000 and added the $2,000 discount from his new vehicle. He will then make $1,000 on the sale of his new vehicle, and he will make another $1,000 on the sale of your old vehicle. If you take the deal, you would pay tax on the $15,000 that you paid to the dealer, so if the tax rate is 8%, your tax would be $1,200, and the total you would pay to the dealer (besides title and license), would be $16,200 and your old car.
If you decided to sell your vehicle yourself, you would buy the dealer’s vehicle for $23,000 plus tax ($1,840) for a total of $24,840. In order to profit from selling your vehicle yourself, you will have to sell your old vehicle for better than $8,640 ($24,840 - $16,200) plus the costs for cleaning and advertizing. Since the value of your vehicle when sold by an individual is $9,000, you may profit by selling it yourself. Or maybe not. Just because the book value of your vehicle is $9,000, that is no guarantee that you will get that price. You may get more or less, depending on dozens of factors, including condition of your vehicle and whether your town's only factory just shut down and laid everybody off.
In any case, there are a few steps that should be taken to ensure that you get the maximum money for your vehicle. Number One is “Clean it inside and out”, including the trunk and engine compartment. Do not shine things that are not supposed to shine, and shine everything that is supposed to shine. If you do not wish to do this job yourself, there are “detail” shops in most areas that will do the job for around $100 to $200. Take everything out of the vehicle that will not be sold with it. Remove all stickers that can be removed without damage to the vehicle, especially controversial stickers, such as those that are politically, religiously, or environmentally oriented. If your vehicle has a smell, make sure it is a clean smell, not a perfume smell, and especially not a smoke smell.
When you advertize your vehicle, remember that “average condition” in the price guides is not the same as “average condition” in the want ads. In the price guides, where condition is not considered (NADA, for example), the prices for all vehicles with a specific description are averaged together. Average condition for a one year old vehicle would probably be described as “excellent condition” in the want ads. On the web sites, like Edmunds.com and KBB.com, the different conditions, such as average and excellent are specifically defined on the web site.
If you have leased the old vehicle, you can either turn it in or purchase it for the residual value and then sell it. This last strategy may sound ludicrous, but depending upon the value of your current vehicle, it might be feasible.
Most banks advise that when you sell your vehicle, it is not advisable to accept a payment schedule. Cash or cashiers check for full amount are the best forms of payment to ensure that the full amount is paid. The banks, also, have a warning, which is that cash is not the only type of thing that is counterfeited today. Counterfeit cashiers checks and bank drafts have also been successfully passed off to unsuspecting sellers. It is most advisable to hold the selling transaction in a bank where the money or check can be immediately verified.