Trade in: trick or treat?

Less of a headache as you can sell your old car at the same dealership where you’re buying the new one.

Published: April 27, 2013 11:24:22 am

Is the bonus you get when you exchange your second-hand car really what carmakers make it out to be? Or is it a marketing gimmick? We find out

If you have looked at the innumerable car adverts in the papers,you probably would have noticed the ubiquitous ‘exchange bonus’ plastered across in bold. Exchanging your old car when you’re buying a new one seems like the smart thing to do and getting a ‘bonus’ only sweetens the deal. It’s also less of a headache as you can sell your old car at the same dealership where you’re buying the new one. But in reality,is it the best thing to do?

Just think about it. Why should a manufacturer give you anything additional over the value of your car? Of course your old car will be sold off later by their used car division,but why should they take the trouble of recovering extra costs? So,is an ‘exchange bonus’ really an additional benefit or is your car being undervalued and adjusted against the bonus?

Recce

To find the answers to these questions,we posed as buyers looking to trade in our old car and visited a few car dealerships. We were owners of a 2009 model Hyundai i10 Era which had covered a shade over 35,000 km.

We visited two dealers,each from different manufacturers,to get our car valued from their respective used car outlets. At Maruti dealerships,we were offered a price of R1.85 lakh and R1.90 lakh,whereas Honda dealers were only willing to go as high as R1.75 lakh and R1.80 lakh. Tata dealers offered us a quote of R1.95 lakh and R1.85 lakh for the car. These prices are not inclusive of the bonuses that get added to it later.

To find if we could get a better deal elsewhere,we also went and visited a few used car dealers. The first dealer we visited beat all the manufacturers’ quotes with a R2.15 lakh offer. Confident of being able to get an even better price we saw another dealer,but this time we were only managed to get a quote of R2 lakh.

The math

So what did we learn? There is a definite difference in the quotes of a manufacturer dealership and a local used car dealer (see box). And there’s a difference within the manufacturer dealer network when it comes to trading in your old car. But once you factor in the exchange bonus you may or may not stand to gain.

This month,there is an exchange bonus of R10,000 on the Maruti Ritz. Adding this to the maximum of R1.90 lakh quoted value of our car,we are still not able to match the best quote by a used car dealer. However,had we been looking at an SX4 for example,which has an exchange bonus of R30,000,the overall price would have been R2.20 lakh,which is better than the best quote by a used car dealer.

At Honda too,the exchange bonus on the Brio was R10,000,which wouldn’t have been enough to warrant an exchange and even the R15,000 exchange bonus of the City wasn’t good enough. By adding Tata Motors’ R20,000 exchange bonus on the Indigo eCS,we were able to meet the best quote,while the R30,000 bonus on the Manza was able to get us the best overall figure.

Good luck chuck

The model you are interested in buying has a big impact on the kind of exchange bonus being offered. And since the discount offers change on a monthly basis,you have to be lucky to strike it right while looking around or you can hold out for another month for a better offer. Although there are still no guarantees that this will work.

So selling to a used car dealer might sound like a good idea. This is not necessarily the case though. Let us explain. When you sell your car through a used car dealer,he will ask you what price you are expecting out of your sale.

His offer,after valuing the car will most definitely be well under your expected price. So,quote a higher expected price. Also,if he is merely facilitating a sale (finding a buyer for your car),then he will take a percentage of the selling price from you. If we were to sell the car at the best price of R2.15 lakh and the dealer was to ask for three percent as commission,then the actual amount you get is R2.08 lakh.

There were also differences between how the car was valued at different outlets. When we got the car valued at car dealerships,the car was thoroughly examined. The valuator looked closely at the car from inside and out.

The car was test driven; it was made sure that the car has no mechanical problems,and that the car has not been in any accidents (most manufacturers won’t buy an example that has been in an accident). We were asked to prove ownership of the vehicle and that the details were exactly as furnished. Compared to this,the local used car dealers didn’t bother too much with the details. We weren’t asked for the registration certificate and only one of the dealers took the pains to drive it for a bit.

There are some other aspects that you should be aware of when selling to a used car dealer as well. You will usually get a better quote from a ‘bigger’ dealer one with a bigger set-up. Once you sell your car to the dealer,paperwork relieving you of ownership is usually carried out. So,in case the car is involved in an accident or any unlawful activity,you are not responsible. But we have heard stories of car’s ownership not being transferred to the new owner after sale; usually done to keep the car as a single-owner example on paper and not reduce its value further when it is put on sale later. No such issues are likely at manufacturer outlets.

The other thing that one can do is sell the car on your own. You are most likely to get the best price by selling it on your own and cutting out the middle man.

You can do this by posting an advert on a website,but this can lead to problems of another kind. Response times will vary and it may also be possible that you won’t be able to sell the car for a long period. Paying websites to show your post higher up in the list or paying for classifieds section of newspapers might work. So,you have to decide whether you will wait for a response as an individual seller or take the offer that the dealers/manufacturers make immediately. Also getting the paperwork done may be too much of a hassle. It’s also one’s perception of value for money,which comes into play as the amount of money saved after all the toil may be nothing compared to the sweat involved.

Save money

Exchange bonuses aren’t really a bonus in most cases. Valuations are decidedly lower at the manufacturer’s end and it’s a combination of different factors that might save you extra money.

The best way to get the most out of your old car then is to first get a ballpark figure of its value from a used car dealer or by looking through the classifieds for an example like yours. Now,try to get the manufacturer’s valuator to come as close as possible to this figure.

To achieve this,get the sales representative involved. If you can convince them that you are really interested in buying a car from them,but only if you get a good price for the old one,they will try to help you get a better quote.

Behind the scenes

A former used car dealer,currently working as a used car valuator at a manufacturer’s sales outlet,gave us some tips for car sellers. According to him,the dealership doesn’t mind giving a little extra in terms of value if they are sure someone is going to buy a new car from them. He also told us that margins are pretty slim in the used car market,and valuations from a manufacturer are also conservative compared to local dealers.

Getting the best value

* Keep a record of your car’s service history. This will prove useful when you’re selling it,because this shows that the car has been well looked after.

* Get the car cleaned and serviced before putting it up for sale. Any minor niggles will be removed,which may put off a prospective buyer.

* Don’t seem over eager to sell the car. Be assertive when quoting a selling price and quote a price closest to what you expect. Quoting R4,49,000 sounds better than R4,50,000.

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