PDA

View Full Version : When does trade-in value come into play when negotiating?


ezatnova
01-19-2006, 02:40 PM
I'll be looking to get a new 330 soon and have a question about the purchase process.

It makes sense that both negotiated price for the new car as well as the amount the dealer will give for your trade-in are both equally important since both impact your bottom line out the door. But, it just seems like, even if I were to solidify a good price that I had in my head for the new car, then the dealer may be likely to then low-ball me on the value for my trade-in. Is there just as much negotiation needed there? Should a buyer solidify the purchase price of the new car first, then demand fair Kelly Blue Book for the trade in? Or the other way around? It would really be a dissapointment to get the price I want on the car, but not be able to do the deal because of a low trade in value given.

Sorry for the newb question, but this is a bit new to me, especially with BMW dealers, and I was hoping for some insight from this forum where hopfully I'll get to be quite a bit if this works out!

SteveinBelAir
01-19-2006, 03:04 PM
You are correct. You should make your best deal on the BM and then introduce the trade in. At least that is how I would do it. Actually I would sell my car on either autotrader.com or cars.com

Good luck.

Malibubimmer
01-19-2006, 03:13 PM
I'll be looking to get a new 330 soon and have a question about the purchase process.

It makes sense that both negotiated price for the new car as well as the amount the dealer will give for your trade-in are both equally important since both impact your bottom line out the door. But, it just seems like, even if I were to solidify a good price that I had in my head for the new car, then the dealer may be likely to then low-ball me on the value for my trade-in. Is there just as much negotiation needed there? Should a buyer solidify the purchase price of the new car first, then demand fair Kelly Blue Book for the trade in? Or the other way around? It would really be a dissapointment to get the price I want on the car, but not be able to do the deal because of a low trade in value given.

Sorry for the newb question, but this is a bit new to me, especially with BMW dealers, and I was hoping for some insight from this forum where hopfully I'll get to be quite a bit if this works out!
Your instincts are right. Always negotiate new car price first. Don't mention financing, or leasing, or a trade in. The dealer expects to make money on everything, so you take one thing at a time. (Otherwise you won't be able to see where the profit is and will be at a disadvantage in the negotiating process.)

The key to success in a negotiation - to buy, to finance or lease, and to dispose of your used car - is to do your homework.

First, find out what the car you like is selling for based on the dealer's invoice. There are ways to check on line and I am sure other posters can help. A search here might be good, too. Also, if you aren't doing a European Delivery, be flexible in the options you might accept, or want, because a car on the dealer's lot is often a better to buy if you can take it - at least the negotiation can be a lot easier.

Second, have your lease or financing, or at least some form of lease or financing, lined up in advance. The dealer makes a profit on this and if you have your own financing, the dealer will usually meet or beat it. You can do a search here for on line leasing companies and on line lenders. You should also check with your credit union, which 90% of the time will give you the best deal. It is illegal for a dealer to requre you to obtain financing through him. You can, but you don't have to.

Third, and here is the shocker, the dealer usually makes more on your trade in than any other component of the new car purchase transaction. You need to know what your current car is selling for in your area. Kelly Blue Book, on line, is a good resource, but then do a reality check by looking in your local newspaper. Some cars are really soft, especially just before a new model comes out to obsolesce it, and KBB often doesn't pick that up. You can see how big the spread is in KBB between retail and wholesale, and you will soon realize that the best thing for you is to sell your car privately. If not, it's a fight to keep the dealer's profit down to only 5 or 10 times the amount of profit he will have made on the new car transaction, if you negotiate well enough.

The absolute worst thing you can do is negotiate as a package. So, get prepared first, and be willing to sell your used car by yourself. It can save you hundreds or thousands of dollars (depending on what the old car is).

chuck92103
01-19-2006, 03:19 PM
If you can, sell your car now.

Go to a local rental car place a negotiate a rental rate for a week or two until you buy another car.

But try to unload the car first. The money saved will more than make up for a few hundred dollars in rental car fees.

Penforhire
01-19-2006, 05:11 PM
Of course selling your car privately is the most cost-effective approach. But if you do trade-in, like I usually do because I don't want the timing hassles, then go into the dealership with a package cost in mind (sale price & trade-in price combined). I have the opposite view of Malibubimmer's. You can always give on one if you get on the other. Dealerships ALWAYS try to screw you on one or both ends of the combined deal but if you stick to your total package cost you'll be able to defend yourself.

In terms of negotiating you know you have to start with an unreasonably low package and be willing to haggle back to a reasonable package. You and the dealership may still have a different idea of what is reasonable but if you use Edmunds' values you'll be close. I haven't "failed" to close a deal within about 95% of my expectations yet.

Get your financing, if you need any, lined up ahead of time. I get a quote from my credit union on the best they could do for me and I use that at the dealership too. Even with credit union pre-approval the dealerships always meet or beat my credit union rate. Don't play the "four square" game (stupid form they use). Get the terms that you know you deserve. Ideally you bring an amortization table with you so you can point out how stupid (high interest rate or term length) their first offers are.

ezatnova
01-19-2006, 05:42 PM
Thanks guys.

I like both approaches suggested...the seperate and the joint bottom line. It's a tough call.

I've never been a part of a credit union. What does it take to join one? Is my regular bank likely a better bet than the dealer for financing? I also am guessing you ask for a ballpark that you need from the financer for a quote, since the final amount won't be known until you negotiate at the dealer.

bten
01-19-2006, 05:57 PM
I always like to run to Carmax and get a 7 day quote. It is quick and easy. One thing to consider is that in many states, you pay sales tax on the difference. Your trade is then worth 6 or 7 percent more than what the dealer is giving you.

hockeynut
01-19-2006, 06:58 PM
Sell it on your own.

Now the important stuff - tell us about your Grand National!!! That was a screamer in its time...

ezatnova
01-20-2006, 06:33 AM
I always like to run to Carmax and get a 7 day quote. It is quick and easy. One thing to consider is that in many states, you pay sales tax on the difference. Your trade is then worth 6 or 7 percent more than what the dealer is giving you.


EXCELLENT point Bten! I bet many people let that one slip their mind! Granted, if you're talking about 10,000 dealer vs 12,000 private sale, that's only about $1200 you make back up at the dealer..but still...

ezatnova
01-20-2006, 06:40 AM
Sell it on your own.

Now the important stuff - tell us about your Grand National!!! That was a screamer in its time...

Oh, it's still a screamer. 12.0 at 112 all day after you take a comfy ride in it to the track. Around 400 hp and 500 tq.

Actually, it's for sale so I can pursue this 330i next Summer/Fall. It's actually up for sale now, but not heavily advertised since it's Winter and, well, it doesn't see salt/snow/or even wet weather for that matter :p

Yeah, so the plan is, sell the GN as soon as I can (I'm in grad school and don't have the time to enjoy it anymore, and it kills me to just stare at it when I get home at 10 pm.) and then plan on selling my WRX right before I get the 330i.

Anyway, not to hijack my own thread, but if anyone wants info and pics of the GN, just shout. It's immaculate inside and out, and is as fast as a beaten cat.

Mr Hyde
01-20-2006, 08:55 AM
EXCELLENT point Bten! I bet many people let that one slip their mind! Granted, if you're talking about 10,000 dealer vs 12,000 private sale, that's only about $120 you make back up at the dealer..but still...

Not sure if you caught exactly what he was saying looking at the numbers you used, selling a car private party for $12k is much better than trading it in for $10k. In NYC, sales tax on $10k comes out to $825, giving you $10,825 for your car. A private party sale for $12k would leave you with $1175 more in your pocket.

In my case, trading in my car was a smart move for me. I had a car which was not in high demand, and I receieved within $1500 of what I thought I could get for my car at private sale if I was lucky. They gave me almost 20k on my trade in, and sales tax on that was $1600+. I ended up at slightly ahead without the headaches of a private sale. No ads to place, no phone calls, or test drives from people who werent going to buy the car, and no worries if they should have any problems shortly after buying the car.

I approached it like Penforhire. I knew what my car was worth, and what I wanted for it. I also knew what I wanted to pay after the trade in on the new car. My sales person was able to meet all my targets after some coaxing, so I left there with a deal. :clap:

Do a little research, and determine what you think your car is worth, and what the car you want is worth. Going in informed is the best way for you to walk out of there with the best deal.

ezatnova
01-20-2006, 09:07 AM
Sorry Mr. Hyde, I missed a zero! I meant $1200, not $120. My point was, yeah it makes up a bunch in tax savings, but in my example, not quite the $2000 difference. I'll edit my missed zero :eeps:

Not sure if you caught exactly what he was saying looking at the numbers you used, selling a car private party for $12k is much better than trading it in for $10k. In NYC, sales tax on $10k comes out to $825, giving you $10,825 for your car. A private party sale for $12k would leave you with $1175 more in your pocket.

In my case, trading in my car was a smart move for me. I had a car which was not in high demand, and I receieved within $1500 of what I thought I could get for my car at private sale if I was lucky. They gave me almost 20k on my trade in, and sales tax on that was $1600+. I ended up at slightly ahead without the headaches of a private sale. No ads to place, no phone calls, or test drives from people who werent going to buy the car, and no worries if they should have any problems shortly after buying the car.

I approached it like Penforhire. I knew what my car was worth, and what I wanted for it. I also knew what I wanted to pay after the trade in on the new car. My sales person was able to meet all my targets after some coaxing, so I left there with a deal. :clap:

Do a little research, and determine what you think your car is worth, and what the car you want is worth. Going in informed is the best way for you to walk out of there with the best deal.

Bart001
01-20-2006, 11:25 AM
In my most recent transaction (buying a 2006 Subaru and wanting to sell my 2000 Honda Odyssey that was in ROUGH shape (high milage, some physical body damage, worn tires, check engine light on, questionable steering hardware), I had to adopt the package approach mentioned by someone else in this thread.

If I had merely negotiated on the new car and settled on a price for it, I would have had zero leverage on the trade. This was a trade that no dealer WANTED. My challenge was to find a dealer that would put up with having to deal with it in order to sell the new car. Shopping for the new car on Dec. 27th helped.

So I determined that $14,000 was the right "package" price. I visited the dealership closest to me, and they let me walk twice without making me that deal. I then went to the next closest dealership, and they did the deal after some typical negotiating when it was clear that I was about to walk.

In this deal I actually violated the 'don't talk about purchase, trade and finance all at once' mantra even further. When the sales manager was close to the deal I wanted, I threw him a bone and said that if he gave me the deal I would forego paying cash and let him write a loan at a reasonable rate so that he could make a little profit on me that way. I gave him a 'gentleman's agreement' not to pay off that loan for the 90-days he needs.

If you have a desireable trade, I think that separating it from the purchase deal can be best. But there are other circumstances.

Moderato
01-20-2006, 06:32 PM
I never understood what difference it made if you mentioned your trade in before or after. If you realistically know how much you should pay for the new car and how much the trade is worth then what's the difference? Either way it should work out the same. If you do some research and ask around no one will be able to B$ you on any part of the deal. Like I said, as long as you're realistic in your expecations and the dealer wants to sell a car then you'll do good regardless of whether you mention the trade or not.

Bart001
01-20-2006, 07:46 PM
I never understood what difference it made if you mentioned your trade in before or after. If you realistically know how much you should pay for the new car and how much the trade is worth then what's the difference? Either way it should work out the same. If you do some research and ask around no one will be able to B$ you on any part of the deal. Like I said, as long as you're realistic in your expecations and the dealer wants to sell a car then you'll do good regardless of whether you mention the trade or not.

I think that you're right. The advice is probably good for those who are not fully prepared and not self-confident enough to trust their own research.

iove75
01-20-2006, 07:59 PM
I think that you're right. The advice is probably good for those who are not fully prepared and not self-confident enough to trust their own research.

Totally agree with you and the previous poster. Stick to your research and make sure you bring your running shoes. Do not be afraid to walk or run away from the deal. I always never buy the car the same day I go in...and I always get a call the next day or in a few hour that the salesman was able to cajole his manager and "sweeten" the deal.

Boxboss
01-20-2006, 08:10 PM
bring your running shoes. Do not be afraid to walk or run away from the deal.That's the best advice. I didn't get the deal I wanted on the 7er and walked. Managed to get 2 blocks from the dealer when the cell phone rang...he "seriously went to bat for me" and convinced the SM to do it.

Boxboss
01-20-2006, 08:16 PM
BTW, the cardinal rule of selling cars is: NEVER, EVER let 'em walk. I even told a newbie salesman that once. He called the day after I'd made my deal somewhere else.