Bit off more than we could chew on a car, looking to downgrade, what happens when you trade a car in for a car of a lesser value?
We got married last April. She needed to replace her car.
in all the excitement of having two incomes and new love, we picked a car that has a payment larger than we should be paying.
We're looking to downgrade. We've been told that the difference in price of selling outright and trading in is minuscule (due to taxes etc). Also, I'm really good at haggling and figure that would be a good tool to haggle with (I got 2 grand over the kbb value last time we traded in).
Advice?
edit: real numbers:
car is worth on kbb 31k trade in. loan is 25k. we're looking to get a new car for around 20k
Posted Feb 14, 2012, 4:36 PM UTC · edited
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It is critical that you understand how to figure this out for yourself. Don't rely upon anecdotal financial evidence from others based upon their specific experience. It is very easy to find out your state's automobile sales tax, and to calculate the differences between trading-in and selling on your own, even taking taxes into account.
It is not recomended to entangle negotiations over the price of a new car and the value of a trade-in. A dealer will often play tricks (and perhaps use the "four square" method) to make you think you're getting a higher price for your trade-in, while they're also selling you the car for a higher price than you might have otherwise paid if you weren't getting such a high price for your trade-in.
The price a dealer will offer on your trade-in is generally going to be based upon the latest wholesale book value ("black book," determined weekly) of the car, and not the value in the Kelley Blue Book. A dealer is not likely to offer you more than what they could get selling the car at auction. They may offer you a bit more if they plan on selling the car themselves. This is why CarMax sometimes (often?) offers a better price than the dealer - CarMax is planning to sell the car on their lot. If one gets offered a great price for their trade-in at a dealership, it's likely because the dealer is selling the new car for a high enough price to still come out ahead in the whole deal.
Good luck.
Yeah, that's generally what I figured happend last time.
we negotiated the price for the new car, and I got it down pretty good.
Once that price was settled, he then offered x on the trade, which i just flat out refused, and bumped the rate up. I realize that this trade in increase was less of an increase on the trade, and more of a decrease on the price.
I appreciate the information, but do you have the answer to the main question, what happens when You trade in a car worth more than the new car?
When trading in an old car you don't own, there are two numbers: what the car is worth, and what you owe. There's one number for the new car - its price.
Add the price of the new car to what you owe on your trade-in. Subtract from that the amount that the dealer is payng you for your trade-in. This remainder is what you'll actually pay the dealer for the new car.
Keep in mind that since you bought less than a year ago, it is very likely that you're underwater on your car note, i.e. you owe more than the car is worth. Which means that if you trade-in your old car for a new car, you're going to pay the dealer much more than what your new car is worth.
Generally, the dealer will take care of all the note-paying off and title transfer, by having you sign a limited power of attorney.
IMO, it sounds like you need to do a bit more of The Math before making a decision. Don't focus only on lowering your monthly payment. Instead, you should calculate the total overall cost (including interest paid) of at least two options: keeping your current car until the note is paid off, and your proposed plan of trading-in your current car for a different, less expensive one.
Good luck.
I'm way confused with what you said and have no idea how you got to your conclusion of i need to think more about the total cost vs monthly.
I am thinking about the total cost, I dont know where in my post it sounds otherwise.
real numbers:
car is worth on kbb 31k trade in. loan is 25k. we're looking to get a new car for around 20k
Because your original post said:
Here's an example of monthly cost vs. total cost, with absolutely no relationship to the real world or the numbers you provided:
$400/month current car payment, 36 mo. remaining.
$350/month new car payment for 48 mo.
The $350/month payment is $50 less per month than the $400/month payment, but $2400 more expensive overall, taking into account the payment amount multiplied by the number of payments.
have you considered calling and refinancing at a lower payment on the 25k? it sounds like your in the positive on the car which is always a good position to be in.
I don't really know, but I would assume that if your car, even at trade in value, is more then the new car you would be getting you should get the difference back. You could always go to a dealer that you're not particularly interested in and go through the motions and see what they say, and you can always wander off saying its not what you wanted to hear. Yes you're wasting the salesman's time but you wouldn't be the first one to do so.