Here’s a question whose answer dampens the spirits on many a car shopping excursion: “What is my trade-in worth?”
This has become especially troublesome since $3.50+ gallon fuel is causing legions of truck and SUV owners to want out of their big iron in exchange for 30 mpg subcompacts.
Try this yourself sometime: go to http://www.kbb.com/, http://www.nada.com/ and Black Book Online (available on various dealerships’ websites, including ours). Enter the year/make/model of your personal car then compare the three results. Are they the same? Rarely.
But when a customer comes to me with a trade-in the exchange usually goes like this:
- Me: “It looks like your trade-in is worth $ X.”
- Customer: “What? No way! Kelly Blue Book says my car is worth wa-ay more than that. You’re trying to rip me off!”
The fact that KBB, NADA and Black Book (and Edmunds plus others) don’t often agree on the value of a particular car tells you something, doesn't it? I mean, I’ve seen spreads of $2,000 or more on some models. If these services can’t agree on a car’s value then why am I being asked to believe that the one you like best is right?
The other problem is this: the nice people at Kelly Blue Book (or NADA or Black Book or whatever) are not buying your car. We are! The people at KBB are not responsible for fixing up and detailing your car and then reselling it at a profit. But these are the things that we have to keep in mind.
Vehicle popularity (or lack of it) exacerbates the problem. If your trade-in is a Camry, or F-150, or Town & Country minivan or some other commonly seen there’s-one-in-every-driveway car your chances of getting a viable trade-in value from the online sources are much better than if you drive a car nobody has ever heard of. There simply aren’t enough wholesale transactions with an off-brand vehicle to provided adequate data.
Examples of cars that are difficult to put a number on are:
- Saabs
- Land Rovers
- Isuzus
- Audis
- Volvos
- and numerous other niche or exotic vehicles.
(Note that this issue is somewhat regional. For instance, while Saabs are popular in some parts of the country, they are a cold brand here in Texas - no pun intended).
Here's an example: you go to KBB and they say your beloved Audi A4 (which is really not beloved or you wouldn't want to get rid of it as much as you do) is worth, say $20K, and I tell it's worth $16K. I now have a huge credibility gap to overcome. But the problem comes from the fact that when KBB's computers searched the wholesale markets for transactions of A4s comparable to yours they didn't find many. Not in our/your area. So they looked for more data by broadening the geographic range of their search. And if that didn't work they expanded their range even more. By the time they got enough comparables to arrive at a fair market wholesale value of the car they were pulling data from 500+ miles from here! That is not this market.
By contrast we got our data by looking for actual wholesale transactions and, after maybe not finding enough data to support a dollar figure, calling local Audi dealers and asking them what they would give for it if it were being offered to them, and then relying on past experience to tell us if we think the car is going to sell quickly at that price or if is going to sit on our lot for 180 days? Then we go with our gut. Can you see now why we can't offer you $20K? We've got to err conservatively.
Yet another problem is when a make of car is slated to be discontinued. For example, a few months ago the word got out that Ford was thinking of dropping the Mercury line. The next day trade-in values of Mercury cars fell through the floor.
If you have a non-popular car and don't like our trade-in offer don't pass up the opportunity to take it to CarMax. They are nationwide and therefore can sometimes offer you more for your car than it is worth in this market. Once they have purchased it from you they will put it on a truck and ship it to a part of the country where that make/model vehicle is more popular. Then they can resell it at a profit.
If you want to do the work yourself you can get a pretty good idea of what your trade-in is actually worth before you ever contact a dealership. Here's two methods I use to get real market comparables when none are readily available.
1). Go to www.cars.com or www.autotrader.com and do a search for cars with your car's make/model/year/mileage for sale within a 50 mile radius of your home zip code. If you only find one or two (or zero) expand your radius to, say, 200 miles. Look at what the sellers are asking for the car. Note this is not the same as what they are actually getting for the car. That part you don't know.
2). Go to www.motors.ebay.com and do the same preliminary search. Then click "Advanced Search" and in the middle of the page check "Completed Listings Only." Now you can see completed auctions and Buy It Now sales for your car. These cars either sold or the auction ended with no sale. If it sold look at the price. Then subtract $1,000. Now you've got a rough idea of what your car can reasonably expect to bring you on the wholesale (trade-in) market.
If we separate your trade-in from the new car purchase that is about to take place and look at it purely as a buy/sell proposition some clarity is achieved. Because, when you get right down to it, when you bring us a trade-in you are presenting us with a simple offer to buy. We have to ponder this for a moment, look at the data, and decide if we want to roll the dice with your car, because when we agree to buy it we are committing to acquiring an asset that we hope we can resell. At a profit. Sometimes it works out that way, sometimes it doesn’t. But rolling the dice is what we do every day.
This has become especially troublesome since $3.50+ gallon fuel is causing legions of truck and SUV owners to want out of their big iron in exchange for 30 mpg subcompacts.
Most of these folks come to me having already been to Kelly Blue Book or NADA online to find the trade-in value of their car. Since I applaud the open-information approach to buying and selling cars you might assume that I am enthusiastic about prospective customers using these services. And I am… but I’m not… sort of. Here’s why.
The first problem is freshness of the data being used. In the wholesale market trade-in values of big thirsty trucks, SUVs and cars are changing daily - and they aren't going up! It is commonly believed that KBB changes its data only every 90 days. Well, at the time of this writing, fuel has gone up .60+ in the past 120 days and in the same period trade-in values of low MPG vehicles have plummeted. Therefore, published values of these vehicles on KBB (and other sources), unless they have been updated in the last few days, are going to be inaccurate.
The first problem is freshness of the data being used. In the wholesale market trade-in values of big thirsty trucks, SUVs and cars are changing daily - and they aren't going up! It is commonly believed that KBB changes its data only every 90 days. Well, at the time of this writing, fuel has gone up .60+ in the past 120 days and in the same period trade-in values of low MPG vehicles have plummeted. Therefore, published values of these vehicles on KBB (and other sources), unless they have been updated in the last few days, are going to be inaccurate.
The second problem is consistency: none of the online trade-in value estimators agree with each other!
Try this yourself sometime: go to http://www.kbb.com/, http://www.nada.com/ and Black Book Online (available on various dealerships’ websites, including ours). Enter the year/make/model of your personal car then compare the three results. Are they the same? Rarely.
But when a customer comes to me with a trade-in the exchange usually goes like this:
- Me: “It looks like your trade-in is worth $ X.”
- Customer: “What? No way! Kelly Blue Book says my car is worth wa-ay more than that. You’re trying to rip me off!”
The fact that KBB, NADA and Black Book (and Edmunds plus others) don’t often agree on the value of a particular car tells you something, doesn't it? I mean, I’ve seen spreads of $2,000 or more on some models. If these services can’t agree on a car’s value then why am I being asked to believe that the one you like best is right?
The other problem is this: the nice people at Kelly Blue Book (or NADA or Black Book or whatever) are not buying your car. We are! The people at KBB are not responsible for fixing up and detailing your car and then reselling it at a profit. But these are the things that we have to keep in mind.
Vehicle popularity (or lack of it) exacerbates the problem. If your trade-in is a Camry, or F-150, or Town & Country minivan or some other commonly seen there’s-one-in-every-driveway car your chances of getting a viable trade-in value from the online sources are much better than if you drive a car nobody has ever heard of. There simply aren’t enough wholesale transactions with an off-brand vehicle to provided adequate data.
Examples of cars that are difficult to put a number on are:
- Saabs
- Land Rovers
- Isuzus
- Audis
- Volvos
- and numerous other niche or exotic vehicles.
(Note that this issue is somewhat regional. For instance, while Saabs are popular in some parts of the country, they are a cold brand here in Texas - no pun intended).
Here's an example: you go to KBB and they say your beloved Audi A4 (which is really not beloved or you wouldn't want to get rid of it as much as you do) is worth, say $20K, and I tell it's worth $16K. I now have a huge credibility gap to overcome. But the problem comes from the fact that when KBB's computers searched the wholesale markets for transactions of A4s comparable to yours they didn't find many. Not in our/your area. So they looked for more data by broadening the geographic range of their search. And if that didn't work they expanded their range even more. By the time they got enough comparables to arrive at a fair market wholesale value of the car they were pulling data from 500+ miles from here! That is not this market.
By contrast we got our data by looking for actual wholesale transactions and, after maybe not finding enough data to support a dollar figure, calling local Audi dealers and asking them what they would give for it if it were being offered to them, and then relying on past experience to tell us if we think the car is going to sell quickly at that price or if is going to sit on our lot for 180 days? Then we go with our gut. Can you see now why we can't offer you $20K? We've got to err conservatively.
Yet another problem is when a make of car is slated to be discontinued. For example, a few months ago the word got out that Ford was thinking of dropping the Mercury line. The next day trade-in values of Mercury cars fell through the floor.
If you have a non-popular car and don't like our trade-in offer don't pass up the opportunity to take it to CarMax. They are nationwide and therefore can sometimes offer you more for your car than it is worth in this market. Once they have purchased it from you they will put it on a truck and ship it to a part of the country where that make/model vehicle is more popular. Then they can resell it at a profit.
If you want to do the work yourself you can get a pretty good idea of what your trade-in is actually worth before you ever contact a dealership. Here's two methods I use to get real market comparables when none are readily available.
1). Go to www.cars.com or www.autotrader.com and do a search for cars with your car's make/model/year/mileage for sale within a 50 mile radius of your home zip code. If you only find one or two (or zero) expand your radius to, say, 200 miles. Look at what the sellers are asking for the car. Note this is not the same as what they are actually getting for the car. That part you don't know.
2). Go to www.motors.ebay.com and do the same preliminary search. Then click "Advanced Search" and in the middle of the page check "Completed Listings Only." Now you can see completed auctions and Buy It Now sales for your car. These cars either sold or the auction ended with no sale. If it sold look at the price. Then subtract $1,000. Now you've got a rough idea of what your car can reasonably expect to bring you on the wholesale (trade-in) market.
If we separate your trade-in from the new car purchase that is about to take place and look at it purely as a buy/sell proposition some clarity is achieved. Because, when you get right down to it, when you bring us a trade-in you are presenting us with a simple offer to buy. We have to ponder this for a moment, look at the data, and decide if we want to roll the dice with your car, because when we agree to buy it we are committing to acquiring an asset that we hope we can resell. At a profit. Sometimes it works out that way, sometimes it doesn’t. But rolling the dice is what we do every day.
