Is it time to look for a car? If you’re considering replacing your current vehicle, one of the first questions you should ask yourself before beginning car shopping is “what is my car worth?” Answering this question is an important starting point to address, as your current car’s value will help you establish a budget for a replacement. A great place to start is Canadian Black Book, which is a free and valuable tool to provide a reasonably accurate estimate of your vehicle’s value. It’s also great to help you determine whether you wish to perform a private sale or just use your vehicle as a trade-in as CBB provides value ranges for both. Also check Auto Trader to see what private sellers and dealers are asking for vehicles like yours in your area – this will also help you establish a realistic asking price. Trade-in values are notoriously less than those of a private sale, but you must factor your own time into performing a private sale as it can be quite extensive: getting your car clean enough to sell (and keeping it that way), taking appropriate photos for online ad postings, creating online ads after setting an appropriate asking price, dealing with prospective buyers and tire kickers, negotiating a selling price and dealing with low-ballers, getting a safety certification, providing a UVIP (used vehicle information package) etc. So, private sales are not for the busy or unwilling – they definitely take an investment of time. And despite your efforts, the added value of selling privately can quickly be eroded with the costs of safety certification and your personal time. But all is not lost if you opt for the trade-in route. Another consideration when contemplating trade-in values is an unseen value – the HST reduction your trade provides against your purchase. Your trade-in applies as a credit toward your replacement vehicle’s price, thus reducing the total taxable price. For example, if you’re looking at a $50,000 car and you’ve been offered $15,000 trade on your current ride, you will only be paying HST on the difference of $35,000; not on the full $50,000. So although your trade-in offer is $15,000 it’s really worth $16,950 ($15,000 + 13% HST savings). If your private sale would yield around $17,000 and your trade-in appraisal is only around $15,000 it’s likely not worth your time to consider selling privately as your trade-in’s value to you is actually $16,950. The disparity in values between private sale and trade-in are often much smaller than they initially appear once HST savings and your time are accounted for.
And here’s another variable to take into consideration: mileage. Obviously mileage affects your car’s value, but what you should know is that if you’re planning on buying a car from a manufacturer dealership (e.g. BMW Toronto) they likely won’t sell higher mileage vehicles they receive on trade. They will probably sell higher km vehicles to wholesalers, who then sell the cars to independent non-manufacturer dealers (e.g. John Doe’s Used Car Sales). Perhaps you can see where I’m going with this, but two additional parties need to profit from the transaction before the final selling dealer makes a profit. So if the vehicle you’re hoping to sell or trade has roughly 100,000 km or more, try going to an independent non-manufacturer dealer to see what kind of offers you can attain. It certainly can’t hurt to keep your options open. I personally like to use this technique as it sometimes maximizes my clients’ offers, and gives smaller, independent dealers some business. And if it doesn’t work out, at least we have an offer in hand that can be used to help negotiate the best trade-in value possible.
Car Compass is a Toronto-based automotive brokerage that assists individuals and companies throughout Ontario with their car shopping needs. From the initial stages of identifying suitable options from which to choose, through final negotiations Car Compass helps save time, money and uncertainty when looking for a vehicle.