Trading in your vehicle means selling your vehicle to a dealership as part of a transaction to buy a new vehicle.

The profits from the trade in are then used towards part finance of the new model and the dealership will go on to sell your old vehicle on their pre-owned floor or into the trade.

The trade in process was how motorists traditionally swapped their old car for a new car but this process has been challenged in recent years with the advent of retailers who specialise in buying and selling pre-owned vehicles and who aggressively market these services, but which is the best option?

The benefits of trading in your vehicle

Trading in your vehicle for a new vehicle simplifies the process as both transactions can be handled as one deal. This could also mean savings as retailers will be more willing to give you a better trade in price if you are buying a new vehicle from them or a better deal on a new vehicle if you are trading in a vehicle with them. This is due to the fact that there is an opportunity for the dealership to make an additional profit by reselling your old vehicle to the next person. One transaction via one dealership also simplifies the financial transaction as the dealership will handle everything for you. This includes settling the balance owing on your old vehicle and either paying you out or transferring the balance towards the financing of your new vehicle.

The benefits of selling your vehicle?

The biggest benefit of selling your vehicle outright is that you can sell it as is. This is particularly attractive if your car has known issues, such as slight damage or requires maintenance to be done, such as the replacement of the tyres. While issues with the car will affect the price there will always be willing buyers as long as the price is right. Selling your car outright might be necessary if your car doesn't meet the dealerships trade in requirements, which could include criteria such as condition or mileage.

Selling your car outright allows you to take the money and buy your next car according to your terms. This option might also be attractive if you are considering a new financing option such as leasing a vehicle or moving onto a company car scheme. The disadvantage of selling your car in this manner is that you need to deal with a second entity and conduct a separate financial transaction.

How is your cars value determined?

Whether you choose to trade in your vehicle or sell it, the value of your car is determined by an industry standard for that exact model adjusted according to age, mileage and condition. Cars depreciate significantly during their first year and will then continue to do so every year. Mileage also has a significant impact on the value and whether you drive less or more than an average of 15 000km per year will have a bearing on your vehicles resale value.

The vehicles condition will also be taken into account when determining the trade in or selling price. Any issues such as stone chips, damage to bodywork and chipped windscreens as well as the wear and tear to the interior will affect the value.

Factors such as service history, the balance of a service or maintenance plan and remaining warranty period will also affect your vehicles value but less significantly.

Do your homework

There is no point in saving in the short term if it is going to cost you in the long run. When considering whether to sell or trade in your car as part of the new car shopping process it is important to consider the deal in its entirety to ensure that that you are getting the best deal in the long run.