How to buy a new car when you have a trade in.

So you want to buy a new car but you have to trade in your old one to help pay for it.

There are a few concerns with trade ins.

Do you still owe money on it? If you do, do you owe more than the car is worth?

Has it ever been in an accident or does it have a negative mark against the title if someone runs a Carfax.

For now lets just find out what your car is worth on the wholesale market.

Take your car to Carmax. They will ask you a few questions about your car. The big ones. Has it ever been in a major accident? Have you ever used it for or has it ever been used as a Taxi or Livery Car? Have you made any major modifications to the car? Do you know of any major problems with it?  Do you have two Remotes and Keys? Remotes now days are expensive.

So lets say you can answer no to all the questions except the key question. Odds are pretty good that Carmax will be the highest bidder for your car.

In the last 2 months I have had Carmax give me a quote on 3 cars. They were the highest initial quote on all three of them out of many dealers. Hands down, had I chosen to just outright sell the cars and not wanted to deal with Craigslist or the hassle of titles and cash or checks then it would have been the way to go. Carmax will cut you a check on the spot. If you really want to sell it make sure you bring a ride home. You might also want to see if Carmax has a car you are interested in. While not the cheapest deal around they are not unfair by any means.

In the last month I told one of my friends to go to Carmax for a quote on his car that he no longer needed and he did sell it to them. It was worth $5500 dollars on it's best day selling it to a private party but it had a known defect that would cost $1000 to fix. Carmax paid him $4000 for the car. So do you think he got a pretty good deal? I do. No need to fix it or try to explain to a buyer that for $1000 he could save $500-$1000 fixing it instead of buying it from a dealer. Take the money and go home happy. That's just what he did.

Another one of the cars, my 2002 Chevy Astro Van with 274,000 miles on it, they offered me $500 dollars on it. Actually that was about $250 dollars more than I thought they would offer. But not enough for me to sell it to them. The KBB.Com site valued it in perfect shape at $5200. Now it was not in perfect shape at all. But, it did have a brand new set of tires, ball joints, shocks and power steering pump and complete brake job including drums, rotors, calipers, pads and wheel cylinders, just to name a few things I had done in the last 6 months. I did them myself so the cost wasn't astrovanomical but it wasn't cheap either. I almost forgot. I had to buy a new battery two days before I sold it.

What it also needed though was a power steering gear, two pitman arms, two tie rods and a rear axle seal. So I was done. Or I should say my wife was done driving or even riding in it. This was a car I was looking to sell outright and not replace.

So why did I take it to Carmax at all instead of selling it outright. I wanted a free Carfax. They run one on every car they quote to buy or sell and they will give you a copy, for free.

More on how I sold this car on Craigslist in another post.

So now you are armed with your Carmax offer. It's good for 7 days.

So if you have read my other post on how to negotiate the best price for the car you want it's now time to let them know you need to trade in your current car to make the deal.

Odds are really good they will offer you  at least 10% less than Carmax. In my case on the car my mother was trading in Carmax had offered $3000. The dealer offered $2000. Big difference. I told them I wanted $4000. They asked me where I got that number. I had access to what that car was selling for at one of the largest dealer auctions. Now I took the highest price and had no idea the condition but it was a valid number on a like car.

They came back with $3000 and I came back with $3500. In the end we settled on $3300 for the car. In many states including mine that number also reduces the amount of sales tax you pay, so it was worth an extra 8% tax savings by trading it instead of selling it outright to Carmax.

On another car, my Miata, Carmax offered $13,000. Two other dealers offered $11,000 - $11,500. At the end of the day one dealer offered $13,200 and the one I sold it to, only because I bought their car, $13,000. In this case the car being sold for the same price Carmax offered I got the sales tax savings of another 8% by selling it to the dealer I bought the car from.

If you owe more on the car than it's worth you are either going to have to come out of pocket for the difference or get the dealer to add the excess amount to your new loan. Not a good position to be in. You should be buying less car or taking out shorter loans.