How much is my car worth as a trade-in?

You've decided it's time to update your chariot for a new or a pre-owned one.

So what is it worth? Failing that, where do you start looking for an answer?

We've previously covered the issue of determining the value of your car when selling privately, but trading it in on a newer vehicle is a slightly different ball game.

The first hurdle is deciding on whether to buy a new or pre-owned model from a retailer.

We spoke with the dealer principal of a multi-franchised operation, and he gave us an insight into what's what.

"For starters, not all cars are equal," the DP explained, "especially when it comes to some brands of cars and the plethora of option packs offered."

The DP, speaking under condition of anonymity, claims that most consumers look at private sales online and take note of the asking price. That sets the price for their car in their minds. When they visit a dealership they expect to get close to that figure and are miffed if that doesn't happen.

What Joe Public doesn't appreciate is that the dealership takes on a level of risk by accepting a trade-in. In fact, risk is the key factor in determining a valuation for a trade-in. Not to mention that dealer vehicles are more often advertised inclusive of stamp duty.

When Joe buys privately it's a case of buyer beware, however when he (or Joelene) purchases from a dealership, the trade-in becomes a risk for the dealer if the used-car sales manager decides to retail it.

It's not unprecedented for a vehicle that appeared to be in good condition when acquired as a trade-in to develop a major fault after being sold by the dealership to another customer. If it's an engine fault or something similarly expensive, the retailer is liable for the repair under the statutory warranty. And that will very likely prove costly.

According to the DP we spoke to, many dealers send trade-ins straight to the auction houses, as they simply aren't prepared to take on the risk.

A vehicle that is still under a new-car warranty will usually attract a premium residual price, as there is little exposure to the dealer.

If it's not covered by a factory warranty, prepping a trade-in for the lot comes to a total cost averaging $5000 per vehicle. That cost includes transfer fee and stamp duty payable.

Each vehicle has to go through the workshop and be thoroughly inspected to ensure it's mechanically sound. Allowances are made for future unexpected issues, including:
· Replacement or reconditioning of parts under warranty,
· Financing for the dealer to keep it on the lot,
· New tyres, a windscreen and other repairs to make the car roadworthy,
· Detailing and body repairs to make it look schmick again,
· And any outstanding recall issues to be addressed.

Dealers also have to undertake a PPSR personal property security register, on every car. It is a costly and time-consuming process.

As the dealer revealed: "When it comes to buying a car Joe Public goes online to find the cheapest one he can, yet when it comes to selling he expects a king's ransom."

So before hassling the dealer and haggling over the trade-in value, a good place to start researching the market value of your current vehicle is redbook.com.au. This handy price guide provides a range of wholesale prices, trade-in prices and retail prices.

As the dealer stated: "When we take a trade-in we are dipping our toe into the unknown every time and we have to cover ourselves accordingly."

Trading in your car at a dealership checklist