03
Aug 2011
Buying a new car - tricks of the trade: Part exchange
In our third edition we ask our industry expert, Adam Leys, to reveal how dealerships drive down the cost of your part exchange.
We’ve already outlined how first impressions at the dealership and the test drive can be used to extract your cash for a new car, but now it’s time to move onto the heavy stuff, namely your part-exchange model, its value and the start of negotiations.
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Comparisons
It’s important to remember where we left off last time with your old car sat next to the gleaming new one you’ve just taken out for a drive.
Your car probably pales into insignificance next to the new model, which might lead you to doubt your own valuation and be more receptive to a lower offer.
Bumps and scrapes
Conversation will move quickly onto your part exchange model and how much it’s worth.
We’ve already described how simple, innocuous questions can lead you towards a positive opinion of the car and the same technique is applied by the salesman with regard to your part exchange model.
You’ll be asked to provide a brief history on the model including any scrapes, bangs or repairs before you’re asked to point out on the car where these repairs or damages are.
By doing so you’re giving the salesman the opportunity to take money off. You’ll next be asked to estimate how much the repairs will cost.
Estimates
Most motorists aren’t a salesman or mechanic so are unlikely to have an accurate idea about how much repairs can cost.
Instead you’ll be more inclined to give a ballpark figure, which may be too high, giving the dealer valid reason to reduce their part exchange offer.
Each part exchange model that comes into a dealership will be given an allocated budget to carry out any repairs and return the car to a condition where the salesman can maximise its value.
That means the salesman will know how much he can get for the model while factoring in the potential repair costs before you’ve had a go at estimating it yourself.
If you admit to a cosmetic scrape and estimate a £100 cost of repair, you’re giving a salesman the opportunity to take £100 of your part-ex value.
If you don’t know, keep quiet.
Profit
A part exchange model gives the dealer three separate opportunities to make a profit.
You’re obviously buying a new car, which will always be sold at a profit no matter how they dress the sale up.
Add-ons, extras and discounts will never see the dealer making a loss on the car (as a general rule, dealerships will make at least £600-£800 for an average car on their forecourt).
The salesman will also get your part-exchange model and sell that at a profit too. Potentially there’s finance too, from which he’ll also take a cut.
That means the dealer should come out of any negotiations where a part exchange model is involved with a tidy profit and a nice bit of commission to boot, so beware of valuing your own car.
Trust me, the dealer needs no help in working out its value.
Tomorrow MotorTorque’s resident expert reveals how a salesman works during negotiations. You’ll never be able to trust a cup of coffee again.