Trade in value

#1

When trading in and buying a new car, does it make sense to trade in a newer car (for example - 1 year old, 10K miles) since there is more state tax savings because of the higher price you get for the trade in? (compared to waiting until the trade in is 3-4 years old and has 40K miles)

#2

Since the taxes are a small part of the price you pay, it shouldn’t weigh heavily on your buying decision. Trading in a car every year will cost you a fortune, since depreciation is highest the first year. I’d wait AT LEAST three or four years before trading in a car, if you have to trade at all.

I buy used cars and keep them as long as possible. Currently I have a '97 Acura with 84K miles and a '96 Subaru with 120K miles. I don’t plan to replace either one any time soon. In fact, I’m hoping to get ten more years out of the Acura.

To me 40K miles is just the beginning, and trade in value is not something I worry about. By the time I’m ready to replace a car it has no significant trade in value but it has provided me with many years of low-cost driving.

#3

Keep in mind that when trading in a car, two transactions are taking place: 1) you are purchasing a car from the dealer; and 2) the dealer is purchasing a car from you. The dealer wants to get as much money from you as possible to for his car and conversely, the dealer wants to purchase your car at as low a price as possible. A car one year old with only 10,000 miles will stay on the dealer’s lot and the dealer will ask, and probably get, a lot more for the car than what you were allowed on a trade-in. As the other post pointed out, depreciation is the big issue, not the tax issue.

#4

I totally agree. The dealer will do anything they can to make the transaction more complex and hid the true cost of the car. If they sense you want to trade and you want a good trade-in price, they will give you that, but then you will pay through the nose for the new car.

Remember it is the final amount of money that counts It’s the total sales price not the monthly payment which is another transaction that they dealer likes to mix into the deal.

#5

Yup. find the out the door price, then negotiate the price of the trade in, then figure out your monthly payments, unless you’re paying cash, then it doesn’t matter

#6

BOTH are financially STUPID. Buy the vehicle you want and keep it 10 years or longer, then trade it in.

#7

I agree with your advice to keep the car 10 years. However, at that point, dealers really don’t want the car as a trade-in. Two times when I went to trade in a car, the dealer wanted more money if he had to take the car. The first time was in 1973 when I wanted to trade a 1965 Rambler for a 1971 Maverick Grabber. The dealer wanted $2200 if I traded the car or $2000 if I bought the car outright. In December of 1995, I found a great 1993 Oldsmobile 88 with only 14,000 miles. The dealer would trade for $14,500 for my 1978 Oldsmobile Cutlass or sell me the car outright for $14,200, so I bought the car without trading. A vehicle more than 6 years old doesn’t have loan value so most dealers send them to the auction house. Selling a car 10 years old or older or donating usually makes more sense.
Incidentally, I still have my 1978 Oldsmobile. I teach at a university and I use it to drive to receptions that our president hosts. As a faculty member, one should go to these things looking poor.