Here’s the latest reader question, along with my reply!
Bill asks: Thank you so much for you very useful and informative remarks (in reply to the earlier question about the new Corvette; see here). I have generally followed the method you suggested in purchasing new cars. But I have a somewhat different circumstance right now. I own a 2011 Hyundai Genesis Coupe with only about 46,000 miles on it. I bought in September of 2010, so it is really 8 years old. Basically, it was garaged and the car is in cherry condition. I also have a 1999 Lincoln Town Car with about 46,000 original miles on it. Similar condition. I was hoping to either trade these in when I get the Corvette or sell them on the private market. What is your considered opinion?
My reply: Rule number one is – never discuss your trade before you’ve completed negotiating the sale price of the new car. For two reasons. First, you don’t want to deal with two complex transactions at once; it’s a very good way to get distracted or exhausted – and end up getting a bad deal. Second, by bringing up your trade before you close the deal on the new car, you open the possibility to shucking and jiving on the price of the new car. A tactic is to give you a “great deal” on the new car – and a terrible deal on the trade-in.
So, focus on the new car first.
If you need cash from the old cars you’re wanting to trade-in on the new car, I would sell them first – before you go shopping for the new car. And I would do so myself, on the retail market. You will almost always end up with much more money in your pocket this way, because you can sell the car for . . . retail value. If you trade the car in or sell it to Carmax or some such, they will (reasonably) want to give you wholesale or trade-in value. This is reasonable because they will then have to clean up/service the car and sell it to someone else for . . . retail value, or thereabouts. If they buy the car from you for retail value, there’s not much opportunity to make a buck on the deal for them – hence not much incentive to make a deal with you.
The upside to trading-in, of course, is that you don’t have to deal with selling the car yourself. Put another way, you are paying the dealer to take the car off your hands – and pocketing the difference.
The macro/Big View thing is to do all of this at your leisure; to avoid feeling rushed. That will usually ensure you end up happy with whatever ends up happening!
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