What Is My Trade Worth

It is one of the first questions that customers ask, but it is the wrong question. What customers should be asking is, “What is my trade really worth.” Sounds like the same question, but one word can make a huge difference. It can be the difference between a customer getting a truly good deal and a customer being made to believe they are getting a better deal than they are. There are a few keywords and some jargon to listen out for such as “showing” and “ACV (aka: Actual Cash Value).”
 What is meant by “showing” is that the dealer wants to give a certain amount for a trade-in, but they want to show the customer they are giving more. As for actual cash value, it is the price a dealer might actually pay you in cash for your vehicle even if you do not buy anything from them. The difference is that at a best price store actual cash value is something said directly to you. At a negotiable price store, it is just jargon that would only be heard whispered in smoky back rooms.
Here is the math for 2 completely different deals:
Deal 1:
Sticker Price: $20,000
Actual Cash Value of Trade-In: $10,000
Difference: $10,000
Deal 2:
Sticker price: $22,000
Showing Value of Trade-In: $12,000
Difference: $10,000
If you look at only the botton line, these look like virtually the same deal. In each deal the customer is going to pay $10,000 after trading in their vehicle. The second might even look like a better deal, because it seems like the customer is actually getting a more expensive vehicle and getting more for their trade. If the vehicle in Deal 1 and Deal 2 are the same vehicle though, what gives?
There is a difference between sticker price and an actual sales price. In Deal 1, the sticker price is $20,000 and the actual sales price is also $20,000. In Deal 2, the sticker price is $22,000, but the dealer is willing to negotiate the sale price to $20,000. Instead of simply selling a customer the vehicle for $20,000, telling the customer they are getting an actual cash value of $10,000 for their trade, and leaving the difference at $10,000, someone at the dealership realizes that the customer believes their vehicle to be worth more than $10,000.
To mitigate this situation, the dealer continues to state the sale price at $22,000 and shows they are going to give the customer $12,000 for their trade. When a dealer states that all of their vehicles, both new and used, are at their very best price available they cannot show trade value. They can only give actual cash value, because there is a tighter profit margin. A negotiable dealer has a profit margin that fluctuates more due to how much they mark-up they may have in a vehicle above the best price they woud be willing to sell a vehicle at.
As I said in my last blog post, every dealer knows what their best price is. Some just hope you will pay a little more. The same goes for trade-in value. Every dealer knows what your trade is worth. Some just hope you will take a little less. Just one little word can mean a lot. How about you? Have you ever heard a dealer tell you they are “showing” you a value? Leave a comment if you have ever picked up on it.

Best Time To Buy

One of the questions I am asked the most in the car business is when they best time to buy might be. This question is usually in regards to the best time of the month or the best time of the year, but it’s more complicated than that. You will often hear the best time of both the month and the year is the end of each. There are some factors at play and it can be dependent on whether we are talking new or used and whether you need to buy or you just want to buy.

For a given month, there is some truth to the idea that the end of the month is the best time. There are often bonuses for certain number of cars sold for the salesperson, the sales manager, or even the dealership from the manufacturer in a given month. If any of these targets are either achieved or unachievable with only a few days left, then the end the month is irrelevant. Typically, it will be the salesperson that needs a sale most before the end of the month and they have the least control over the price if they have any at all. On the other hand, a dealer may want to get a good start to a month if the previous month was a bad one. The same can be true with the middle of the month. If everyone is behind target for end of month goals in the middle of the month they may be willing to deal too.

There are factors related to new vehicles that impact this as well. Rebates regularly end at the beginning of each month. So even if the sales targets for the folks at the dealership are irrelevant, you might lose out on $500-$1,000 if you do not get a deal done before the end of a month. For instance, for the last few months Ford has been giving us a few thousand dollars at $1,000 increments to apply to certain vehicles. They decided monthly whether to continue them and kept them for about 3 months, but they ended yesterday. Your $19,000 car might have just become a $20,000 car. This might be only relevant if you are really ready to, or need to, buy a car right now.

Another factor (also related to rebates) is when certain model years are released. For instance, F-150’s typically come out at the end of the year while the new Escape model has been out about 2 months already. So a 2017 Escape actually comes out in Spring of 2016 while the F-150 comes out closer to year end. Rebates will begin to really increase leading up to the new model year for each specific vehicle, and especially once they start finding their way to the lots. The manufacturers want those old models off of the lot, so they will increase the discounts to help dealers move them. I’ll tell you why you should beware of waiting too long for those rebates in my next blog post.

Lastly, the end of year question. Yes, there are some extra rebates and yes there are some year end goals, but they are not nearly as strong as what is believed. I believe there used to be more truth to this and it might even be more true at larger dealers who have a lot of volume, but I do not think it is so.

In the end, I’ll call the “end of month deals” mostly true and the “year end deals” mostly false, but as you can see there is a lot more to it!

If you have any questions feel free to comment, call me or text me at 660-342-3715, or just come see me at 1801 N Elson!

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The Trade-In Process (Part 1)

For this post, I decided it was important for me to do some research on the subject considering that this is one in which I can see dealers handling the process differently. I was not necessarily surprised to see a lot of misinformation, but I was surprised to see some of the tactics that some dealers use (or have used) in the trade process. Since there is a lot of information to be discussed about this process I have decided to break this topic into separate posts so that I am neither too brief on the subject nor too long winded on it. For today, I am simply going to give you a snapshot of how the trade process should. Then, I will tell you a few things to absolutely not put up with that I found during my research.

The first thing that happens when you bring in your trade is that we will get all of the information off of the vehicle so that we can appraise it accurately. First, we will get the make, model, trim level (please, please, please refer to my blog post “What’s In A Name” about this subject), mileage, and VIN (vehicle identification number) of the vehicle. I will also typically do a quick walk-around of the vehicle myself to both make sure the appraiser sees any visual damage on the vehicle and also to make sure that he notes all of the additional options your vehicle has that adds to the value (large dealerships will usually have someone whose main job is to do the appraisals whereas our Sales Manager does all of ours).

Next, we will use the VIN number to run a vehicle report history. This history tells us multiple things about your vehicle including number of owners, number of accidents, and an odometer check making sure there has been no rollback on mileage. There is other information available such as if there were any hail damage reports, water damage reports, or, more importantly whether there is a salvage title on the vehicle.

As you might expect, an odometer rollback is never a good thing. This means that it is now and forever impossible to tell exactly how many miles a vehicle has on it. This can make a vehicle very hard to sell and therefore will likely decrease the vehicles value. Number of accidents is not as important as the severity of an accident, but if the number is high it can impact value. The importance of the number of owners depends on the age of the vehicle. If the vehicle has 4 owners and is fifteen years old, that is pretty normal, but if a vehicle is only five years old and has 4 owners that can be a sign of trouble. Not to mention that one of the first questions people ask is how many owners a vehicle has. For vehicles that are five years and newer people typically only want to hear that the vehicle has one owner; maybe two.

While the salesperson is running these reports and making sure you are comfortable, the appraiser will be out driving your vehicle. Before they go out they will do a quick walk-around of the vehicle looking for any damage to the vehicle and looking at tire wear. After that, they will make the same trip on every drive taking your vehicle through rough roads to listen for something like bad shocks. Then they will take it on the highway to listen for sounds that a rougher and louder road might cover up like tire noise.

While they are out they will also check to make sure everything works such as the air conditioning, radio, automatic windows, etc. This may seem like ways for the dealer to de-value your vehicle, but it is more so that they will know what they will have to fix. Try thinking about it like this: If you were going to a reputable dealership to buy a pre-owned car would you not expect the air, radio, and windows to work? The dealership will have to fix these little problems which will obviously cost them money.

After all of this, the appraiser will take this information and use several resources to determine the value of your vehicle so that they can make you a trade offer. I will discuss this trade evaluation process in the next blog post so that you know exactly how they will come up with your value and I will give you some tips on how to be ready for this step in the car buying process.

I will end this post with two things I read about in my research of the trade process you should absolutely not put up with. Walk out if these things happen to you at a dealership:

1. DO NOT let the salesperson or the appraiser do a walk-around of the vehicle and invite you to be with them for the purpose of pointing out every ding, dent, or minor blemish to your vehicle. They are merely trying to reduce the value of the vehicle in your eyes. This is just flat-out disrespectful. With the internet age and impact of social media, I think this tactic has likely gone by the wayside since they don’t want people openly sharing this distasteful treatment.

2. DO NOT let a dealership lose or hide your keys. I cannot believe I even had to type that, but apparently some dealerships will purposely lose your keys (I heard of one that openly threw the keys on the roof!) so that you will be at the dealership longer and they can keep negotiating with you  and wear you down. Again, I imagine that this has disappeared in the social media age, but the fact that I read it on several current articles absoutely floored me.

Please leave me a comment if either of these things have happened to you.