Trading in or selling privately? Choose wisely

The Covid-19 pandemic has brought economic hardship to many households and left most consumers with some tough financial choices to make.

Consumers are under increasing pressure to make ends meet at the end of the month and one area in which many households are trying to free up cash is on their cars. Trading down has been an ongoing trend over the last few years and has increased significantly in the midst of Covid-19’s economic pinch. It’s not only clear from new car sales, but also a popular trend judging by search data from online pre-owned portals.

When car owners decide to trade down or buy another car for whichever reason, the majority will replace their existing cars. Which leaves most car owners with two choices, to either trade in their current car on the one they’re buying or to sell it privately.

When you are buying a car from a reputable dealership, trading in your existing vehicle is the easiest option, especially if you need finance on the wheels you are looking to purchase. In the case of your existing car not being paid off yet, the dealership will settle the amount still owed to the financial institution and apply for new finance on the vehicle you are buying. If all goes well, it’s a very easy and pain-free process. You bring in your existing car, sign a number of documents and drive off in the car you have purchased.

But this comes at a price. A pre-owned car has two listed values as published in the Transunion Auto Dealers’ Guide. One is called trade and the other retail. The trade value is the lower of the two and that is what a dealership is likely to offer you for your existing car, while the retail value is an indication of what the dealership will then sell that car for. Depending on the car’s condition, colour, history or mileage, both values can be adjusted higher or lower than what is indicated in what is generally referred to as “the book”.

Dealerships will offer you a trade in price for your vehicle. Picture: iStock

For example, a specific model could be listed with a trade value of R80 000 and a retail value of R100 000. If that car is in impeccable condition with less mileage than considered average for its age, a dealership might offer you a trade price of R85 000 knowing it is likely guaranteed to sell it for at least R105 000.

On the other hand, if the car is not in great shape, has done excessive mileage, has a questionable service history or all of the above, the trade in offer could be lowered to less than R70 000 with the retail price being adjusted down to around R90 000. Even if you don’t plan to buy another car from them, a dealership can still take a car off your hands in what is called a “buy out”, but they are likely to offer you an amount very similar to what the trade in price will be.

Knowing that the very same car will eventually be sold for a lot more than the trade price offered is a bitter pill to swallow for many vehicle owners. And that is the driving factor in making many of them explore the possibilities of a private sale.

In theory a private sale is very easy, especially when it’s a cash deal. Payment aside, all the buyer requires is the vehicle’s registration documents needed to transfer the car into his or her name at the licensing department. Once that is done, the car officially belongs to its new owner. But selling a vehicle privately has many potential pitfalls if you do not know and/or trust the person you are selling it to. Especially in this day and age where criminals are taking their chances at every opportunity

There are plenty of ways – of which many cheap or even free – to advertise a car. You can do this with as many pictures and additional information as you want, but you’ll have to agree to a viewing and test drive at some stage. And finding the right location for that is of utmost importance.

Advertising your car privately online is very easy. Picture: iStock

If you are dealing with complete strangers, you should try and avoid meeting them at your house at all costs. Not only will you potentially put your own safety and that of the other members of your household at immediate danger, but also run the risk of a possible hijacking in your own yard or driveway.

Agreeing to meet a potential buyer at a random neutral venue that might seem safe could seem like a better option, but even that comes with its own risks. There have been many horror stories of people locked in their own boots and driven off with for hours after setting up a viewing for a potential buyer at service stations or mall parking lots. Some have even lost their lives in the process.

If you do your homework and manage to set up a test drive or viewing in an environment you feel safe and comfortable in, you can at least afford yourself more peace of mind. If you do manage to find a buyer interested in buying your car, you can expect some form of request or negotiation before agreeing on a price. If a buyer has done his homework and goes so far as to have it inspected professionally, you should take a realistic approach.

Not all potential buyers are criminals and on the contrary, chances are you might find someone interested that is just as concerned over being screwed over by you as the seller as you are of them trying to do you in. If it happens that you as the seller turns out to be the one trying to conceal something, you can just as easy be caught out by a savvy buyer.

When there is some form of obvious mechanical deficiency or body damage, a private buyer might either request you to have it fixed or negotiate a lower selling price to compensate for the repair costs in order to get the vehicle in a roadworthy condition. This is very similar to what a dealership would have done anyway. If they offer you a trade in of R120 000 for example, they might claim that paint scratches will cost R5 000 for them to repair in order to sell it for the book retail price, resulting in them to offer you R5 000 lower.

When selling privately, expect the buyer to request an inspection. Picture: iStock

Once you have agreed on a price, getting the money from the buyer is the next concern. Back in the day before internet banking criminals had a sneaky trick of adding a few zeros to a small amount on a hand written deposit slip from the bank and faxing it to the seller as proof of payment. Things are significantly more secure in the age of internet banking, but that doesn’t mean criminal are not trying their luck anymore, so make extra sure that you did receive the right amount before handing over the keys.

The final sticky point of a private sale could be the changing of ownership at the licensing department, should there be any additional fees or outstanding amounts against the registration number on the system. Should there be an issue, again it will have to be settled between the buyer and seller.

It is possible to sell a vehicle privately that is still financed, but the buyer will have to be very patient and trust the seller throughout the process. The finance house will only provide the seller with the car’s registration documents once the loan agreement has been settled, meaning that it could be quite a few days after a buyer parts with his cash that he can only get his hands on the paperwork.

In the end a private sale will always be more lucrative than a trade in, but not everyone is prepared to undergo the effort it might take to make a few dozen thousand rand extra. If you are willing to give it a try, make sure to do your homework and be as cautious as you can.

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