The Role of Trade-Ins in New Car Financing: Maximising Value

If you’re buying a new car, you probably have an old one to get rid of—out with the old, in with the new. An exchange like this could make your life easier and significantly reduce the cost of a new car loan. It gets a little more complicated if you have car finance remaining on your old vehicle, but there are still workarounds.

The lending specialists at the Fox Finance Group have helped borrowers in a wide range of situations, and in this guide, we’ll provide some top tips on trade-ins.

Whether you’re seeking a new or used car loan, if you have something to trade in, this is the article for you.

The Benefits of Trade-Ins

The biggest downside to trading in your car is that you won’t get the best price for it. You can find a reputable dealer and negotiate until you’re blue in the face, but it’s unlikely that you’ll get as much as you would from selling privately.

Not only does the dealer have their bottom line in mind, but they are also subject to a 10% goods and services tax (GST), which doesn’t apply to private sellers.

But that doesn’t tell the whole story.

Firstly, trade-ins are far more convenient. There’s no need to list your car and deal with private buyers. You won’t be hassled for test drives and don’t need to negotiate with buyers. You just hand it over and benefit from…

• A streamlined and hassle-free buying process
• A reduced upfront cost on your new car loan
• No need for a road worthy certificate

Dealerships will gladly take a vehicle that needs repairs. They make a living out of fixing and selling after all. A private buyer will be a little less willing.

Assessing the Value of Your Trade-In

To know whether you’re getting a good price, you must first learn the market value of your vehicle.

There are trade-in calculators available on car-buying sites, but the price they show is the price they’re willing to pay, and not always the true value.

Instead, check the following sites:

• CarsGuide
• OnlyCars
• PriceMyCar
• GumTree Cars
• CarSales

Every car is different, and value is influenced by miles, age, condition, and demand, as well as the make and model. Look for listings like yours and check the average price.

Preparing Your Trade-In for Maximum Value

A little prior preparation is needed to maximise your car’s value and minimise hassle:

• Fix minor issues: As noted above, you don’t need to worry about major repairs. You may end up spending $5,000 to fix them, only for the dealer to give you $4,000 more. But you should fix the minor things, the ones that just need a little time and effort.
• Clean it: Although it won’t make a massive difference to the price, it’s still important to present a clean and sparking vehicle.
• Check the seats: Once it’s gone, it isn’t coming back. So, check under and behind the seats for valuables and documents.
• Gather documents: Speaking of documents, you’re going to need the service records and owner’s manual, as well as other paperwork. It lends more credibility to the vehicle.

Trading-in Your Vehicle When You Have Existing Car Finance

It might be possible to trade-in a vehicle that still has finance. The process will depend on whether the car is worth more than the remaining payments/balloon payment (positive equity) or whether those payments exceed the value (negative equity):

• Positive equity: You’re in a good position and can use the equity to secure a discount. 
• Negative equity: You may need to pay the difference between the balance and trade-in value.

Before committing to this option, check the terms of the car loan or speak with a specialist, as it’s not as straightforward as trading a car you own outright.

Finding the Right Car and Negotiating the Trade-In Deal

Once you find the right vehicle for you, research the price and see if there are any changes you can make to bring the price down, such as opting for a more basic model. Look for manufacturer incentives, including discounts and additional warranties, and try to establish a market value. Understanding the value and demand will give you some leeway during the negotiations.

Speaking of which, the next step is to start haggling. The dealer might try to convince you that there isn’t much room to manoeuvre, but there’s always something they can do. During trade-ins, you have two considerations:

• Getting more money for your current vehicle
• Getting a lower price for your new vehicle

It’s not just the value that you need to focus on. Consider the loan term and down payment too. Reducing the former will increase your monthly payment but reduce the total interest; increasing the latter will leave you more out of pocket in the short term but make the car loan more manageable.

There’s a lot to consider, so if you need expert advice, contact one of the lending specialists at the Fox Finance Group.

Trading In vs. Selling Privately

Should you sell privately or trade-in? This is not an easy question to answer, as there are pros and cons to both options.

• Selling privately: It’s easier to negotiate a higher price for your vehicle. If one buyer isn’t interested, there are many others. You’re not tied to strict timelines, either. You can sell the vehicle and then spend some time shopping around for a new one, whether that means buying a cheaper used car outright or using the funds as a deposit on a new car.  
• Trading-in: You can’t put a price on convenience, and being able to hand over the keys in exchange for a new car discount is invaluable. It’s usually the preferred option for drivers who don’t have the time or patience for private selling.

Our lending specialists can help you find the best solution if you’re still not sure.

Considering Trading in your Car?

Trading in a car might not get you as much money as selling it privately, but it’s easier and faster. Remember to:

• Clean it
• Fix minor issues
• Prepare documents
• Check for valuables in/under seats
• Consider positive vs negative equity if your car has finance
• Negotiate the trade-in value and your new car loan

Finally, be sure to check the loan terms and conditions. Read everything, understand everything, and seek assistance if you’re not sure. The Fox Finance Group is always on hand when you need expert lending specialists to help you get the best deal on your trade-in new car loan. We can help with trade-ins, bad credit car loans, and a whole lot more.