Are you in the market for a new car? Perhaps your existing car is a shadow of her former self. Or your family has grown, and you need a wider backseat to separate warring siblings. Whatever the reason, trading in for a new model is not as simple as a quick key swop. Doing your research can help you avoid common pitfalls such as buying a car you struggle to afford or accepting too low a trade-in price.
Marius Neethling, Underwriting Personal Lines Manager at Santam says, “No matter how you decide to sell your old car, there are always things you need to be mindful of. Knowing how to estimate the value of your car and having great negotiation skills can get you the best value on your sale. This is beneficial when selling your car on your own – and crucial when trading in at a dealership.”
Here Neethling shares his top six tips for a car trade-in:
Tip 1: Know your worth
Do your research and make sure you know the market value of your vehicle. You can do this by checking online car retailers such as Autotrader, Cars.co.za and Reeds.co.za or popping into a few car dealerships to get an average estimate.
If you’ve modified your car in any way, like if you’ve installed a state of the art sound system, TV screen or leather seats, these additions could help you negotiate a better price. And don’t be discouraged if the value of your car has dropped since purchasing. Cars depreciate at a rate of 15% to 20% per year.
Tip 2: Know the lingo
Get to know what the different valuations mean so you don’t get bamboozled during negotiations with a dealer.
- Retail value: The average price a car dealer would sell your car for.
- Market value: If you were to sell your car privately, this is the price that you could likely sell it for. The evaluation is based on things like mileage, vehicle condition, service history and accident reports.
- Trade value: Less than the retail value, this is the amount of money that a dealership will give you for your old car.
Tip 3: Decide how you want to sell
There is no right or wrong option, only the best option for you. Selling privately could ensure that you get a better deal although you need to be prepared to do all the admin and paperwork yourself.
Trading in at a dealership, on the other hand, may save you time, but you must be mindful of hidden costs such as dealership mark-ups. If doing it this way, a good idea is to negotiate the trade-in price with the dealership before you indicate which model you are interested in. This will separate the trade-in deal from the new car deal, ensuring you get the best possible price for both.
Tip 4: Know your budget and stick to it
The monthly instalments on a car are only the tip of the iceberg. There is a useful rule of thumb that states the running costs of a car are roughly equivalent to the monthly payment. So if your car payment is R5 000 per month, you will need roughly another R5 000 per month for petrol, maintenance and insurance. Work out a budget including running costs long before you go car shopping because car salesmen can be very persuasive – stick to your guns!
Tip 5: Keep your finances in check
If you have existing vehicle financing, make sure to notify your bank that you are selling your car. It’s important that you know the full settlement amount and the trade-in value of the car. The dealer will then pay off your old loan and give you a credit for the value of your trade vehicle.
Tip 6: Make sure you’re not underinsured
Don’t assume that your insurance premium for your new car will cost the same as it did for your previous car. When you have your eye on a new car, call your insurance company to see what the car insurance premium would be on your new car. Almost all insurance providers allow you to replace your old vehicle with the new vehicle and they’ll amend your policy to reflect that.
There are four types of insurance to consider:
- Comprehensive: This includes third party liability and covers accidental loss or damage to a vehicle. Comprehensive car insurance now comes with a guarantee. Guaranteed value insurance is cover that makes things right if your car is written off or stolen (Ts and Cs apply).
- Limited cover (fire and theft): A more cost effective option, this will cover accidental loss or damage to a vehicle, including third party liability only if the loss or damage is as a result of fire, lightening, explosion, theft or attempted theft.
- Third party only: This is the bare minimum cover you should have. This covers the amount for which you are legally liable to a third party (if the liability relates to the vehicle).
- Shortfall cover: Sold with comprehensive as an additional add-on cover, shortfall cover pays the difference between your vehicle’s sum insured or market value (whichever is the lesser) and the outstanding settlement value in terms of a credit agreement that you entered into.
“Motor vehicles cost consumers hundreds of thousands in costs. Updating your insurance before leaving the dealership in your new car is vital to avoid an event where you might not be covered. Careful research can insure that you are not caught unaware when driving off with your new wheels,” Neethling concludes.