Trading in your car is not that simple

Are you in the market for a new car? Perhaps your existing car is a shadow of her former self. Or your family has grown and you need a wider back seat to separate warring siblings.

Whatever the reason, trading in for a new model is not as simple as a quick key swap. Doing your research can help you avoid common pitfalls, such as buying a car you can’t afford or accepting too low a trade-in price.

Marius Neethling, underwriting personal lines manager at Santam says: “No matter how you decide to sell your old car, there are always things you need to be mindful of. “Knowing how to estimate the value of your car and having great negotiation skills can get you the best value on your sale. “This is beneficial when selling your car on your own and crucial when trading in at a dealership.”

Neethling shares his top six tips for a car trade-in:

1 Know your worth

Do your research and make sure you know the market value of your vehicle. You can do this by checking online car retailers or popping into a few car dealerships to get an average estimate. If you’ve modified your car in any way, like if you’ve installed a state of-the-art sound system, TV screen or leather seats, these additions could help you negotiate a better price. And don’t be discouraged if the value of your car has dropped since purchasing. Cars depreciate at a rate of 15% to 20% per year.

2 Know the lingo

Get to know what the different valuations mean so you don’t get bamboozled during negotiations with a dealer. Retail value is the average price a car dealer would sell your car for.

Market value is the price that you could likely sell it for if you decided to do it privately. The evaluation is based on things like mileage, vehicle condition, service history and accident reports. Trade value is the amount a dealership will give you for your old car and is less than the retail value.

3 Decide how you want to sell

There is no right or wrong option, only the best option for you. Selling privately could ensure you get a better deal, although you need to be prepared to do all the admin and paperwork yourself. Trading in at a dealership may save you time, but you must be mindful of hidden costs such as dealership mark-ups. If doing it this way, a good idea is to negotiate the trade-in price with the dealership before you indicate which model you are interested in. This will separate the tradein deal from the new car deal, ensuring you get the best price for both.

4 Know your budget and stick to it

The monthly installments on a car are only the tip of the iceberg. There is a useful rule of thumb that states the running costs of a car are roughly equivalent to the monthly payment. So if your car payment is R5 000 per month, you will need roughly another R5 000 per month for petrol, maintenance and insurance. Work out a budget including running costs long before you go car shopping because car salesmen can be very persuasive – stick to your guns!

5 Keep your finances in check

If you have existing vehicle financing, make sure to notify your bank that you are selling your car. It’s important that you know the full settlement amount and the trade-in value of the car. The dealer will then pay off your old loan and give you a credit for the value of your trade-in vehicle.

6 Make sure you’re not under insured

Don’t assume that your insurance premium for your new car will cost the same as it did for your previous car. When you have your eye on a new car, call your insurance company to see what the car insurance premium would be on your new car.

Almost all insurance providers allow you to replace your old vehicle with the new vehicle and they’ll amend your policy to reflect that. There are four types of insurance to consider: comprehensive, limited, third-party only and shortfall cover. “Motor vehicles cost consumers hundreds of thousands.

Updating your insurance before leaving the dealership in your new car is vital to avoid an event where you might not be covered.

Careful research can ensure that you are not caught unaware when driving off with your new wheels,” he says.

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