Take this scenario: you go to buy a new car and decide to trade in your aging but reliable set of wheels. A salesman offers you $10,000 for the car. A few days later, the same vehicle turns up on the used-car lot selling for $13,000. Suddenly, you feel $3,000 poorer. What gives?
It’s pretty simple. Trade-ins are bought at wholesale discounts and sold at retail prices. The salesman knows that selling a car privately can be a hassle and that you’ll be dinged with the full GST and PST, if applicable, on any new purchase. With a trade-in, you pay GST and PST on the difference between the trade-in value and the new-car price. An Ontario buyer, for example, who doesn’t have a trade-in would pay $3,750 in tax on a $25,000 new car. If the same buyer had a $10,000 trade-in, she would pay $2,250 in tax – a savings of $1,500. The higher the value of your trade-in, the greater the tax savings (and potential markup for the dealer).
But if you can’t rely on car dealers to come up with an unbiased price for trade-in value, don’t count on the average used-car seller to be completely objective. After all, sellers tend to pad their prices, hoping someone will bite. So, where can you go for an unbiased idea of what a car’s worth before you shop the used-car market or ponder a trade-in?
Fortunately, used-vehicle value guides, which list average wholesale or trade-in values as well as retail prices, are now readily available to consumers. An industry guide lets you know the kind of price you should expect at trade-in and gives you the leverage you need to negotiate. Canadian Red Book – used by insurers, appraisers and auto dealers – is published 12 times a year. One issue costs $12 plus tax. Visit www.canadianredbook.com or call 905/469-6468. Governments also use Red Book values to determine the provincial tax paid on used cars that are sold privately. The consumer version of Canadian Black Book is published 12 times a year by Wm. Ward. Vice-president Kathy Ward describes it as “the biggest guide in the finance industry and the dealer side.” The Wholesale Retail Vehicle Guide costs $20 plus tax for one issue. Visit www.canadianblackbook.com or call 1/800/562-3150.
“Our guide gives people a better idea of what they should roughly expect for a vehicle,” says Imants Grotans, president and publisher of Canadian Red Book. “You get an idea of whether you’re getting a fair shake.”
Don’t let your attachment to “old reliable” blind you to your car’s value. “Everybody thinks they own a cream puff and that’s not necessarily true,” says Sandra Capar, managing editor of Canadian Black Book. “Our guide helps educate people on how the condition of a vehicle and its features affect price.”
A vehicle’s age, mileage, exterior and interior appearance and mechanical condition influence price. “Body damage (scratches, dents), missing trim, a chipped windshield, rips or cigarette burns on the seats, rust and obvious mechanical deficiencies such as a stalling engine will bring down a car’s value,” says Kevin Bavelaar, president of Auto Showplace, a Toronto-based used-car dealership. “Believe it or not, if somebody smokes a pack a day, it affects the value of a vehicle later. It’s difficult to get that smell out.”
Options that boost value include: automatic transmission, air conditioning, cruise control, power windows, power door locks, tilt steering and leather upholstery. But in the end, a car is only worth what a willing buyer is prepared to pay. After all, even cream puffs can get stale.
Maryanna Lewyckyj is consumer advocate for the Toronto Sun. She conducts car care seminars for women through her company, Autophobics Anonymous.