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To Part Exchange Your Car or Not to Part Exchange Your Car?

To Part Exchange Your Car or Not to Part Exchange Your Car?

2 February 2018 Concept Car

Times change, trends come and go, but the part exchange is still, by far, the most popular way to sell a car.

According to the confessions of an anonymous salesman, roughly 3.2 million people each year engage in a part exchange, a staggering number by any means. When one of the UK’s leading car magazines, Auto Express, asked car owners for their opinion on how they preferred to sell their current model, part exchanging came in a clear winner, with almost half the total votes.

One big questions remains, however:

Is part exchanging really the best way to buy and sell a car? Or are there perhaps potentially attractive alternatives?

In this article, we will show you the pros and cons of a part exchange and why it has remained so stubbornly popular throughout the years. We also have a few recommendations on how to make the most out of a part exchange if you do decide to go for it.

Before we can go there, however, we first need to get something out of the way:

How, exactly, does a part exchange work?

The basic principle is simple: When buying a new or used car, the dealer agrees to simultaneously buy your old vehicle as well. The two formerly separated processes of buying and selling a car turn into a package deal.

Historically, one of the most important reasons why the part exchange attained its dominant position is that the deal reduces the costs of financing. Instead of having to shell out the full price for a car, you can now subtract the income generated from your former vehicle from it. This can lead to better conditions for your loan, some cases, it may even be the only thing that makes financing possible in the first place.

Is a part exchange your only option, however? Not really …

Part Exchange: Alternatives

The perhaps most obvious alternative to a part exchange is selling your car directly to a private buyer. To do this, you need to place an ad in a newspaper – or on an online platform – describing the state of your car and asking for bids. You then wait for potential buyers to get in touch with you and select the best offer – which can either be the highest bid or a combination of a trustworthy attitude and money.

Whereas the confidential ad is a classic option, it has lost a lot of ground lately thanks to a new generation of (online) services. Today, there are apps that you can use to sell your car, for example. Simply create a profile for your car, enter an approximate selling price and wait for the negotiations to begin.

There are also companies that promise to buy your car, regardless of its condition. To do this, you enter your details and the condition of your car on their website. You will then receive a first, not yet binding offer. If this sounds interesting enough, you are directed to a dealer nearby who inspects the car and gives you a final quote on the company’s behalf.

So how do these alternatives compare to a part exchange? Let’s take a look …

Why part exchanging has remained wildly popular

You wouldn’t have suspected it from this sober description that the part exchange would ever come to entirely dominate the market for car sales. And yet, it has remained unrivalled for decades. The reason for its enduring popularity are some serious benefits that few of the other options can match.

So what are these miraculous advantages that we speak of?

  • Firstly, a part exchange is by far the most comfortable and easy solution to the twin problems of buying and selling a car. It allows you to theoretically drive to the dealership in your old car, exchange it for a new model and drive home again. With some of the other options, you will at least temporarily be stuck with two cars or none at all.
  • You also save a lot of the hassle (and the ad costs) associated with a private sale or an ad. As anyone who has ever done this can testify, these tend to attract a sizable crowd of rather less serious people. And to separate the wheat from the chaff can take time.
  • As mentioned before, part exchanging makes the financing aspect a lot easier. Since this tends to be a significant problem – or perhaps the most significant problem of for many buyers – a part exchange has an inbuilt lead over a private sale or a confidential ad.
  • A part exchange can be particularly beneficial if you’re ‘downtrading’ to a less expensive vehicle. After all, as car news website Perrys explains, “this likely means a larger chunk of the cost of a new car will be taken out by your older model.”

This, as you’ll see, doesn’t mean that a part exchange is perfect, however.

The potential disadvantages of a part exchange

The main downside to part exchanging your car lies precisely in it being a package deal. You will essentially pay a premium for the comfort and security of taking care of two problems in one transaction. Or, to put it differently: You will on average sell your car at a lower price in a part exchange than you could by selling it privately.

Interestingly enough, when Auto Express compared the different sales alternatives to each other in a hands-on review, they found that there was very little between a part exchange of a particular model and the private sale of the same car. Both were more lucrative than any of the other options.

One of the reasons may be that you will never get the ideal price on the private market, either. If only for the fact that the buyer will never get the same degree of protection in case something goes wrong. Plus, you will need to be excellent at haggling, which is not to every body’s liking.

What’s more, since dealers can sell second-hand models at excellent prices, they can afford to pay a little more and still make a profit.

In the end, none of the alternative to part exchanging offers the full package. And so, it makes sense to at least always consider it as your very first option.

If you’re visiting different dealers to arrive at your car of choice (which you should!) you will need to be able to compare their offers. This is done by a measure called ‘the cost of changing’. In the next section, we’ll explain to you …

… how to calculate the cost of changing

The cost of changing is an instantly plausible gauge to compare different offers.

This is the formula:

[Price of the vehicle you intend to buy] – [Trade-in value of your old car]

The resulting amount is what you will have to pay your dealer for a part exchange. The lower the cost of changing, the better the deal for you.

As buyacar.co.uk have explained, the cost of changing is a far more accurate way to arrive at a sensible decision than considering the purchase price of the new car alone:

“If a new car costs £10,000 and you’re offered £3,000 for your current car, then the cost to change is £7,000 – the difference between the value of your part-exchange and your new car. Another seller may only offer you £2,500 for your car. That may seem like a bad deal, but if they’ll sell you the car that you want for £9,000, then you’re going to end up paying less because the cost to change is only £6,500.”

Now you know how to calculate the best deal, it is time to look at some of the strategies you can use to get the cost of changing as low as possible.

Recommendations on how to get the best price

Car getting MOT done

Part exchanging a car is not rocket science. The following recommendations may therefore seem like common sense. You’d be surprised, however, at how many people manage to get them wrong:

  • Make sure you carry your full documentation with you. These include the V5 registration document, the service/history logbook as well as bills for any repairs carried out on your vehicle. Since these documents provide the buyer with essential information regarding the state of your car, don’t forget them – or try to find silly excuses in case you do forget them.
  • As Which? have stressed, you should clean your car both from the outside and inside and to “pay special attention to the parts a driver is most likely to see, such as the dashboard, steering wheel, seats, carpets and windows”. If you’re selling a comparatively pricey model, it might be worth it to have some bodywork done to boot.
  • An MOT is a great way of getting a better trade-in price and to thereby reduce the cost of changing. However, there are some details you need to take into consideration. For one, if you sell the car just ahead of an upcoming MOT, you raise suspicions. If you sell it directly after an MOT, you will essentially have paid for it for the next user. Better to follow the advice of the ‘Car Expert’:If you can schedule your car buying and selling for halfway through your MOT/service schedule, you won’t have wasted all the money you spent to have them done but won’t be penalised for selling just before they’re due.”

The best recommendation, however, is simply to know exactly what your car is worth and to make it clear that you will not sell it for any less (leaving a little space for compromise). Used cars can make a dealer a lot of money, so your chances of getting a better trade-in price are a lot better than reducing the price of the new vehicle. And it can help to approach a dealer who specialises in the same brand of your current car – since they will treat these preferentially.

If you play your cards well, you can walk away from a part exchange fully satisfied and with a great deal. Times may change – but this benefit will always stay.

2 February 2018 Concept Car