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To Trade Or Not To Trade?

At first glance, parlaying one used car on the way out into a newer one seems like an academic decision that delivers nothing but gains. Toronto offers a big market full of choices in buying and trading used cars and trucks but the used-auto market has a few more intricacies than meets the eye.

We always recommend buying a used vehicle as a means of gradually building up toward one day purchasing a brand-new car or truck with cash. The long-accepted wisdom has been that buying a used car upfront, putting the equivalent to a monthly car payment into savings each month and gradually buying newer and newer used cars over several years quickly accumulates enough to own a new car with no payments. Call it truth being stranger than fiction, but it’s just that trading in a vehicle to a dealer doesn’t always best leverage its value.

 

PROS

SIMPLICITY

One thing is undeniable about trading in a used car on a fresher model: trading in provides a more streamlined process.

Selling a car usually entails advertising it, then meeting with buyers for test-drives, negotiations and eventually the paperwork that comes with transferring the title. There’s a certain X-factor of not really being certain as to the kind of person with whom you’re dealing, right up until the check clears, if the other party isn’t paying cash.

That’s not to say that unscrupulous dealers don’t lurk throughout the Greater Toronto Area. When it comes to trading a vehicle, though, it’s a matter of reaching a black-and-white pricing agreement that legally binds you both – you’ve accepted the compensation and they’re legally obligating themselves to provide it.

RELEASE OF LIABILITY

Here’s another advantage to trading versus selling: what the next party does with the vehicle after you sign over ownership in a trade-in won’t be your responsibility at all. In more than one instance, courts have sided with private used-car buyers in holding previous owners culpable for damages suffered because of the vehicle’s condition at the time of sale.

No such entanglements tend to arise with trade-in agreements. The dealer knocks a comparable approximation of the vehicle’s value of the price of the sold one, and typically puts in time and money for maintenance to iron out any existing issues.

FINANCIAL BONUSES

Offering a trade can shave costs off the ensuing purchase by virtue of how dealerships compute tacked-on fees.

Dealerships generally tally up taxes based on the purchased vehicles price after deducting a trade-in value instead of basing it strictly off of the MSRP. Depending on how new a used car you’re buying, this could make quite the dent.

 

CONS

  • LESS UP-FRONT VALUE?

Before deferring directly to trading in a used car, always at least consider a private sale.

Vehicles don’t always yield greater value by trading toward a new or newer-used one. When a dealer makes a trade, it’s with the idea in mind of turning a profit on its resale. As with anything else, that means weighing how much is being “paid” – or, in this case, foregone on the sale of another vehicle – in return for the bottom line on a resale.

You can always take the cash from selling your vehicle and put it toward the new car’s purchase price yourself. Just remember, the dealer isn’t exactly guaranteed – nor in any way obligated to – offer the vehicle’s exact Kelley Blue Book value.

  •  LIMITED OPTIONS

This is fairly straightforward.

Suppose you sell your car. You now have cash in hand and the prerogative to spend it however your heart desires. On the other hand, consider your options with a trade-in: if you accept a trade-in value, it only applies toward that dealership’s vehicles. That represents a bit of a gamble, if you haven’t already set your sights upon a certain vehicle on the lot.

 

Numerically, the pros may outweigh the cons. However, this isn’t a strictly quantitative assessment.

As you can tell, it’s actually very subjective. Weighing one pro against its corresponding con – say, an efficient transaction versus higher cash value – can come down to what a potential seller/trader is willing to forego or values more. Others, such as a trade-in’s inherently limited ensuing options on a new vehicle can depend on the individual scenario, such as whether you have one specific vehicle that’s physically on the lot already available.

Choose wisely. Trade-ins offer a great deal of value, but they don’t often jibe with the exact circumstances.

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