This story was inspired by a reader who recently asked us for advice on whether she could sell her 2009 Toyota Corolla, buy a cheaper car and clear some cash to pay some bills. We looked into it, and the news wasn't good. Because she overpaid for the car in 2011, she is upside-down in her loan by $2,000.
Here are the tools and mistakes to avoid:
Photo Credit: dno1967b
In the case of Mary's 2009 Corolla, the trade-in value the dealer would pay today is $8,800 unless he chiseled the party he or she bought from down from that number. The price the dealer will charge, according to our search tool that is based on Kelley Blue Book values, is $11,869. See, dealers are tacking on $3,000 on top of what they are paying for the vehicle. Even a private-party seller is adding $1,600 to the trade-in value, and charging $10,369. It is critical to research these three numbers, so that you know where your bargaining leverage is.
Examples of these quick depreciating and marginally popular vehicles Mary could have chosen include any of the cars we mentioned above as comps to the Corolla. The comparable Chevy HHR with the same 65,000 miles as the Corolla has a trade-in value of $8,301 and a retail price of $11,476. That's $400 less than the Corolla, but I'd bet that the price to drive it off the lot could be hammered down by another $800 at least, for a $1,200 discount to the Corolla. The comparable Hyundai Elantra has a trade-in of $8,645 and a retail price of $11,870.
Look for lower mileage even if you get a car that is a year older. If this is a car you figure to drive until it drops, I would look for a car with low miles even if it is a little bit older. For example, Felicia B. from Bernardsville, NJ asked us to hep her find a good used car. We directed her to a 2006 Acura MDX with 70,000 miles on it, and one owner. The suggested Kelley Blue Book retail value was $17,328, and the dealer trade-in value was only $13,178. We advised her to offer $14,200, and that was what she was able to get it for. That was a better value for her money that a 2009 she looked at with 100,000 miles. That car's suggested retail price was $24,394 and even the trade in price the dealer paid was around $19,000. She plans to drive the car until it gives up the ghost, so taking the lower mileage on the older car was a much better fit for her budget and we helped her get a great price on that car.
This is not a hard and fast rule, but we like one-owner cars. A car with two or three owners makes us less confident of getting a good car.
Understand the dynamic here. He or she wants to sell that car, and you want it at the best possible price. He or she negotiates every day, so they are good at it. You do it once every few years, if that often, so use these tools to narrow the experience gap.
If saving potentially a couple thousand dollars is important go and check at least two other cars, and repeat the process. Insist they contact you by email to make it simpler. And don't be afraid to play one off the other. "I like the Corolla, I really do. But frankly, the other car I am looking at has more equipment and the discount off the sticker is better than you are offering, and value for my dollar is very important to me." You never need tell the salesperson you are working what the other vehicles are. Just say they are "very comparable."