Entering into the car buying process can be a disheartening experience. It stirs up distrust because there is a seemingly endless supply of predators waiting for their next victim. It also invites a certain level of anxiety because it requires you to know the appropriate value of your vehicle.
With the increased availability of do-it-yourself technology, many tools exist to help equip you with the necessary information needed to reasonably negotiate the price of your vehicle. The key is to determine the fair market value for the car you want to sell. That sounds easy, but getting accurate information from reputable sources can be challenging. Follow these guidelines as you move forward in the process of selling your vehicle and you will significantly increase your chances of negotiating a very reasonable agreement.
According to Consumer Reports, a non-profit, independent, expert resource for consumers, "knowing a vehicle's true value is critical to getting the best deal". Understanding the difference between retail price and wholesale price/trade-in value is essential in determining your vehicle's price. Before you get started, know the terminology so that you can talk the language. Consumer Reports defines these prices as:
The Retail Price
This is the higher of the two, and is what you would expect to pay for the car if you were buying it at a dealership. If you are buying it from a private seller, you can usually expect to pay a somewhat lower price. This is also considerably higher than the price you'll probably receive for your trade-in because it includes a profit margin for the dealership.
Wholesale price/trade-in value
This is essentially a car's trade-in value to someone, such as a dealer, who wants to sell it to someone else for profit. Understandably, it is much lower than the retail price and it is unlikely that you will be able to buy a used car for this price. But it's also a figure you should know if you're trying to decide whether to trade in your current vehicle or sell it yourself.
Both price definitions are useful whether choosing to trade-in or privately sell your vehicle. Understanding both will help you decide which your best option is as you consider selling. Once you become aware of these car buying/selling terms, it is important to determine the price of your vehicle under each definition because the values for both will be strikingly different.
In order to effectively do this, you should research multiple pricing guides to begin the process of determining the "book" value of your vehicle. The book value is based upon several factors including the year, mileage and condition of your vehicle (among other things). Assess your vehicle's value both as private seller and as a trade-in, and utilize multiple sources for this determination. Here are three reputable sources are listed below:
Kelley Blue Book (KBB): www.kelleybluebook.com
Edmunds: www.edmunds.com
National Automobile Dealers Association (NADA): www.nada.com
Follow the easy prompts provided through each of these websites to help calculate the value of your vehicle. Utilizing multiple sources will strengthen your position as you begin to see a consistent price range. Write down the values provided from each source and keep them with you as you begin your dealings, and of course use the highest value provided. These sources are immediately recognized in the car buying/selling industry and they will provide you with legitimate negotiating weapons as you discuss prices with potential buyers.
Now that you have gone through the process of examining your car's retail and trade-in value, it is time to decide which best suits your personal situation. Go on-line or call your lender and determine the pay-off balance of the current vehicle you own. When you obtain this figure, compare it to the retail and trade-in values that you just researched.
Is your pay-off balance higher than any of the retail or trade-in values you came up with in your research? If so, that means that you are upside down. When a person is upside down in the car industry that means they owe more than what the vehicle is worth. Should you decide to sell or trade in your car in this scenario, know that your loan amount will be higher to include the difference of the pay-off and the agreed upon price of the vehicle, if your loan is approved. In this situation, it is generally recommended to wait until you pay your loan down before selling or trading it in.
If you determine that you are not upside down and that you have equity in your vehicle, decide which selling route would be in your best interest. If you want/need a different vehicle quickly, and you are satisfied with the terms, then trading your vehicle into a dealership might be the quickest and easiest way to go. If you choose this path, understand that you will be agreeing to a lower price for your vehicle than you would expect in a private pay situation because the dealership will need to secure a profit from your transaction.
If you need/want to sell your current vehicle and there are no pressures to do so immediately, it might be wise to consider advertising it a bit higher than the retail prices identified in your research process. Listing it higher will allow you room to negotiate but stick to your bottom dollar as you deal with potential buyers.
Finally, when you make the decision to sell or trade in your vehicle, being prepared to effectively negotiate in either scenario will ensure that you come out on the other side of the transaction with your dignity intact and the best possible price for your vehicle. When you accomplish this, you will have successfully sold your vehicle based on legitimate preparation, and you can walk away with confidence knowing you did not get victimized in the process.