When should you trade in your car?

During the many years before selling your car privately became as easy as it is today, changing vehicles would normally involve negotiating with a dealer.

In fact, several dealers could play a part as buyers went from yard to yard before eventually accepting a price for their old car that might leave them a little or a long way out of pocket.

Times change and sites like carsales.com.au make selling a car on your terms a lot easier and safer. However there are still times when the speed and convenience of a trade is the best way to go.

If you still owe money on the car you want to sell, then trading it to a licensed dealer can be almost inevitable. If you don't have the money to pay out your current finance, you cannot provide a private buyer with 'Clear Title'. It is also very difficult for most people to get a loan on an upgraded vehicle unless they have sold the current one.

Provided you have details of your current loan on hand, the dealership can very quickly obtain a pay-out figure. Then comes the quite complex process of negotiating a 'change-over' price for the vehicle you want to buy, getting approval for a new agreement, paying out the current contract and hoping your old car's trade-in value is enough to cover the difference.

If the trade-in price offered for the old banger isn't enough to bridge the gap, you may need to pay a higher cash 'deposit' which covers the shortfall between what the dealer is prepared to offer for your car and the all-in cost of the next one. This cost includes government on-road costs such as stamp duty and registration, but there may also be other fees applied by the retailer or financier as well, so make sure these are listed in the contract and explained.

The trade-in value you'll be offered for your car is subject to many factors which are covered in detail elsewhere (see 'Further reading' below). However, the vehicle you want to buy – or which a salesperson might convince you to buy – will influence the proceeds from the sale of your car.

If the kind of vehicle you buy is less important to you than just being rid of the old one, then looking around the cars on offer in the yard might unearth one that will bring a better financial result. A new car that has spent close to 90 days 'on the concrete' needs to find an owner in a hurry and the yard will be more likely to offer an attractive trade on these than on stock that has just arrived.

Owners who can haggle the best deal are the ones with cars the dealer doesn't need to be coerced into buying. If your current vehicle is relatively new and low-kilometre, but you need something different for work or to carry more passengers, then the sales staff at the dealership will be interested.

The same applies if you are 'back-trading'. This can occur where someone who has recently retired or been retrenched needs a smaller, cheaper vehicle plus a cash rebate.

The best deal is of course the most advantageous combination of 'sticker price' for the new car, low depreciation for the car you're trading, finance rates and any extras the dealer might offer to help capture your business.

Despite what a desperate salesperson might tell you, the deal in play today will still be available tomorrow. Get the trade-in offer in writing, collect if you can offers from other outlets and spend the night working out which is best. Then get back to the successful dealer first thing next day and sign the papers for your new car.