Selling your car

If you’re in the market for a new car, you probably have another car to trade or sell.  In most cases, you can get more for your car by selling it on your own versus trading it in towards your new car.  But there are a few things to consider before doing so.  

First off, the value of your trade-in will reduce the amount you owe in sales tax on the new car.  So when selling your car, be sure to cover the cost of extra sales tax on the new car.  For example, if your trade-in is valued at $10,000 then you need to sell it for at least $10,700 to cover the 7% sales tax. 

Secondly, selling your car will take some time and effort.  Here are the steps you’ll need to take before posting your ad. 

Clean it –You’ll need to clean your car inside and out.  You can do this yourself or take it to a detailing shop.  A good detail will cost around $150, but could be well worth it on your return. 

Photos – Most online sites allow 8-10 photos.  Use all you are given.  Be sure to show all sides of the car (front, back, sides).  You can take a 3/4 view photo to cover a couple of these in one shot (see examples below).  If you car has any damage, include a photo.  Honesty pays and the potential buyer will see it sometime, so be upfront about it.  Include pictures of the interior, especially the driver’s seat, dashboard and odometer (to verify mileage).

Description – As you’re selecting the options on your car, be thorough.  Don’t just go from memory.  Look over your car and check the window sticker (you saved it right?!).  In the written description, highlight some key words (always garaged, no accidents, condition of tires, non-smoker, etc.).  If you’re unsure what to write, look at some existing ads for cars like yours and see what attracts your eye.

Pricing – Some listing sites will give you an approximate selling price.  I recommend checking Edmunds.com, Cargurus.com and Autotrader.com.  These sites will show you the value and what similar cars are selling for.  If you want to move your car quickly, price it slightly lower.  If top dollar is your priority, then go for full asking price.

Posting – I recommend posting it on Autotrader.com or Cars.com.  The fee is around $40.  You can also list it on craigslist.com, but be prepared for low-ball offers.  The other disadvantage to craigslist is that you sell to a limited market.  The other sites list across the state and country, whereas craigslist is local.

Be patient – Once your ad is posted, you probably won’t have buyers beating down your door!  Stay strong, it could take several weeks to a month to sell (depending on where you priced it).  Most of the offers will be for less than your listed price.  Because you did your research on pricing, you’ll know how much you can come down.  Be prepared to haggle a little, but don’t take less than it’s worth. 

Be smart – Now that you have a buyer at an agreed upon price, you need to be smart.  Don’t take a personal check and require a cashier’s check.  Craigslist has some good information on spotting a scam, so check it out.

If this seems like too much work, you can always trade-in your car to the dealer.  Or you can contact me and I'll help you through the process.  Just send an email to andy@indyautoshopper.com

Does buying a hybrid save you money?

With gas prices near $4 a gallon again, it’s time to crunch the numbers to see if buying a hybrid will truly save you money.  For comparison’s sake, we’ll look at two different hybrids and their sister cars.  The Toyota Prius is the top hybrid in terms of recognition and sales so we’ll choose it.  Now finding its sister car is a bit tougher.  Based on passenger volume the Toyota Matrix would be closest.  However, if fuel efficiency is more important, the Corolla is the one to choose.  So we’ll compare both.  We’ll also check the Ford Fusion since it has both a regular and hybrid model.  For pricing, we’ll use the TMV value at www.Edmunds.com and the average price paid at www.TrueCar.com.

Toyota Prius (3)                                                Toyota Matrix S                                Savings

Edmunds - $25,560                          Edmunds - $21,895          $4,065

TrueCar - $26,340                             TrueCar - $21,874

Average - $25,950                            Average - $21,885

Toyota Prius (3)                                                Toyota Corolla SE             Savings

Edmunds - $25,560                          Edmunds - $19,736          $6,175

TrueCar - $26,340                             TrueCar - $19,814

Average - $25,950                            Average - $19,775

Ford Fusion Hybrid                          Ford Fusion SE                   Savings

Edmunds - $29,118                          Edmunds - $22,956          $6,693

TrueCar - $30,063                             TrueCar - $22,840

Average - $29,591                            Average - $22,898

All cars were comparably equipped with cloth seats, CD, sunroof, automatic, etc.

The next piece of the puzzle is the cost of gas per year.  We’ll use the combined cycle numbers for fuel efficiency, an estimated 15,000 per year and the price of gas at $4 a gallon.

	Combined MPG	Miles per year	Gallons per year	Cost per year	Extra cost per year
Toyota Prius (3)	50	15,000	300	$1,200	n/a
Toyota Matrix S	22	15,000	682	$2,727	$1,527
Toyota Corolla LE	29	15,000	517	$2,069	$869
Ford Fusion Hybrid	39	15,000	385	$1,538	n/a
Ford Fusion SE	26	15,000	577	$2,308	$769

The numbers are all crunched and now it’s time for the verdict.  How long will it take for you to recuperate the extra cost of the hybrid with its gas savings?

Prius vs. Matrix

It will take you 2 years and 8 months until you break even.  After that, it’s money in your pocket

Prius vs. Corolla

This one will take a little longer, 7 years and 2 months until you reach the breakeven point.

Fusion Hybrid vs. Fusion

This is the longest span by far, over 8 years and 8 months.

If gas goes to $5 per gallon as some have speculated, the repayment times are shortened (2 years & 2 months, 5 years & 7 months, and 6 years & 11 months, respectively). 

Based on these numbers, if you plan to keep your car for over the repayment period, it makes sense to buy a hybrid.  If you tend to switch cars more frequently, then stick with the regular gas version.  Whatever you decide to do, be sure to analyze all the numbers and make sure you’re spending your money wisely.

So, looking at these number, are you surprised or did it confirm what you’ve suspected?  Let us know your thoughts. 

Buying a new vs. used car in this market

The prevailing wisdom in the past was that it’s always better to buy a good used car than a new car.  This was based on depreciation and initial cost.  However, we are living in different times right now.  As many of you have seen or heard, the average price of a used car has risen substantially in the past couple years.  One report on Edmunds.com showed that prices of 3 year old used cars are up significantly.  A Honda Civic was up 10% over last year and a Hyundai Sonata was up 20% over the previous year.  Bargains can be found, but they are tougher to find now.  In addition, several 1 year old used cars cost MORE than their new counterparts! 

Click here to see a full list (http://www.edmunds.com/car-news/new-vs-used-car-buying.html).

There are several reasons behind the rapid surge in used car prices.  The first reason is low used car inventory.  With the recession, people have been holding onto their cars for longer, especially the ones with good gas mileage.  Secondly, fewer people were leasing during the recession and the supply generated from off-lease cars decreased.  Finally, people didn’t have the money or financing for new cars and therefore had to hold onto their existing cars. 

So what should you as a car buyer do?  Here are several options to consider.

The first option is to buy that new car you’ve been dreaming of, especially if you have a trade-in that gets good gas mileage.  These cars are in high demand at nearly all dealerships and you can expect a good trade-in value.  Just don’t take the first offer they give you!  The new car will come with a full warranty and you’ll know how well it’s been taken care of because you’re the only one who has owned it.  Plus it will have that new car smell!

You can also trade-in your car for a newer used car.  The savings won’t be as much as in years past, but the difference in the higher price should be washed out with the higher trade-in value.

“But I don’t have a car to trade!”  If this is the case, you may have to wait until the prices normalize.  This could take 6 months or more, so it may not be the best option if you need to do something quickly.  However, deals will be available, but it will take extra time and effort to locate them.  You will also need to act quickly.  So come prepared with preapproval for financing.

Taking control of the new car buying process, at the dealership

(Note:  see “Taking control of the new car buying process, preparation phase” for the previous steps.)

Now that you have a written or emailed quote for the new car and a ballpark quote for the trade-in, you’re ready to go to the dealership.  Keep your guard up and be mentally prepared to walk away at any time.  If you can’t do this, I recommend bringing a friend who can help you and be a voice of reason to you.  It’s tough to walk away from your dream car, but you need to have the strength and will to do so if need be.  When you’re there and you’ve gotten a reasonable, written quote for the trade-in you’ll now start the paperwork process.  It’s a long one!  Double check all finance numbers before signing anything.    The contract is binding once you’ve signed. 

You will now meet with the finance manager.  If you are financing your car, you’ll work on the interest rate you’ll be paying.  Many dealers will advertise a low interest rate to get you into the dealership.  Typically you’ll need nearly perfect credit to qualify for this rate.  It’s best if you come with a pre-approved loan from a bank or credit union.  This way you’ll know your credit score and have an interest rate they need to beat.  Some dealerships will say you don’t qualify for the lowest rate due to your credit score.  If you know you have great credit, then you can call their bluff and get the best rate.  Once again, if you educate yourself you’ll save money. 

Now that the numbers are all agreed too, you’ll be asked if you want an extended warranty, fabric protection or other add-ons.  I recommend against purchasing these items.  First off, they don’t really add that much value to you.  If you’re buying a reliable car to begin with, why do you need an extra warranty?  Also, the paint and seats are already protected with a factory spray.  In fact, the paint protection is typically just an expensive wax job!  Just politely say “no” and continue with the signing.

Once you’ve completed the final signature, the car is now yours.  You should get a walk around with the salesperson to ensure everything looks good and a brief introduction to all the features.  If they don’t do this, ask them to do so.  It will help you feel more comfortable with the car as you drive away.

The process described in this entry and the previous entry can be very time consuming and difficult.  If you feel that it’s too much for you or you’re not able to negotiate as strongly as required, there are people who can help.  Auto shoppers or car concierge services exist and they can handle all this for you.  Typically they are paid a flat fee or percentage of MSRP.  This can be a valuable service if you’re in the right situation and they may cost less than you expect.  My company (Indy Auto Shopper, www.indyautoshopper.com) is one such service.

I wish you the best in your search for your next car.  Be sure to educate yourself, prepare before going to the dealership and be willing to walk away if you don’t get the deal you want.  These three things will help you save money on your next purchase.