Is your car’s aircon not working again? Brakes causing you headaches? These are some of the common gripes car owners have to deal with, making it very tempting to get a dealer to take it off your hands. If you’ve decided that a trade-in is for you, make sure you have the full picture, as the process of trading a car is often misunderstood. We answer some common car trade-in questions.
How does trading in a car work?
Typically you would see a car at a dealership you want and the dealer would agree to buy your old car from you and apply that price as credit toward the purchase of the new car. ‘Trading’ is not as simple as swapping keys – it usually requires additional money or a loan to get a new vehicle.
Can I get one car for another?
This is only possible if the wholesale value of your trade vehicle is equal to the retail value of the other vehicle. Remember: the price you will get is the market value, not the retail value – in other words, the price they will sell it on for that includes their mark-up. It’s important to know the approximate trade-in value of your car because dealers will always try to pay as little as possible for it.
How do I know how much my car is worth?
You can get valuations from a few dealerships to get an estimation of what your vehicle is currently worth and what the market value is of the vehicle you’re intending to buy. Then get in touch with Santam to see what your car insurance premium should be.
How much will a dealer give me for my car?
It all depends on your car’s condition and what kind of stock he/she is after. If you kept the car clean and well looked after, and it wasn’t in any major accidents, you’ll get better offers. Always negotiate the price of your old car separate to the new car you’re interested in. For example, a dealer might give you a fantastic price on your old car but simply ‘hide’ this cost as an increased price on your new car.
What happens if I still owe money on my trade in car?
It’s important that you know the pay-off amount – how much you still owe – and the trade value of the car – how much the dealer is willing to offer you. A dealer will then pay off your old loan and give you a credit for the value of your trade vehicle. You may not receive as much credit for your trade as you might have expected.
- If the value of your car is more than the amount of your loan payoff, the payoff amount will be subtracted and you’ll get a credit towards your new car. E.g. say you car is worth R150 000 and you still owe R100 000, you will only get a R50K credit.
- If the value of your car is less than the amount of your payoff – e.g. your car is worth R75 000 but you still owe R90 000, this difference (called negative equity) will be added to the cost of your new car.
What paperwork do I need?
- Proof of ownership: If your car is paid off, get the proof of ownership documentation and a letter stating that the vehicle has no outstanding finance on it from your bank.
- Outstanding finance: Request a settlement letter from the financial institution where the vehicle is financed, and tell them that you’re planning to sell the car.
- Roadworthiness certificate: This certificate is only valid for 21 days and can be obtained at a vehicle testing station.
- NCO (yellow) form: A Notification of Change of Ownership form should be submitted to the Department of Transport to notify them that the vehicle will have a new owner.
- Receipts and service history: Take your original manufacturer service book along to the dealership, plus any receipts you have for maintenance or repairs on the vehicle.
How does it work with insurance – will the dealership sort this out?
No, this is always your responsibility. When you have your eye on a new car, call your insurance company for a quote to know what you’re in for. On the day of the sale, call them to update your details and the cover will kick in immediately. Don’t leave this for a few days – you never know what could happen once you drive out of the dealership parking lot!
Good luck with your trade in negotiation! If you are still making up your mind if you should take the plunge and trade in, read our questions to ask to decide if the timing is right. Want to ensure your new car is adequately covered? Speak to your broker or call us on 0860 444 444 to request a quote. Visit our car advice page for more useful tips.