Trading-in a vehicle (versus selling privately) has both pros and cons. On the downside, dealers generally offer the wholesale value of a trade-in, which could be less than what a consumer might get selling privately. On the positive side, trading in a vehicle is easier, faster and more secure; it avoids the myriad of headaches (e.g. no-shows, ownership transfer, obtaining secure payment) associated with selling privately; and, there are tax savings to be had when trading in. For example, a consumer with a $10,000 trade-in, who is buying a $25,000 vehicle, will only pay HST on the $15,000 cash difference ($25,000 - $10,000); a significant savings of $1,300.
Determining Fair Value
When trying to determine the value of a trade-in, consumers should understand it can be affected by numerous factors including the vehicle’s popularity, its condition, mileage, colour, even the time of year or locale. But there are resources/steps that may help a consumer determine what that value might be:
- Consult the Canadian Black Book (canadianblackbook.com). This free online service provides general information including wholesale value estimates.
- Get an appraisal from another dealer. Many offer this service for a small fee; they may even make an offer to purchase the vehicle directly.
- Make the dealer aware of recent repairs/improvements made to the vehicle (e.g. new tires or new brakes), this could increase the value of the vehicle because it will decrease the dealer’s re-conditioning costs.
- Know the current condition of your vehicle. Much needed repairs could bring down the value of the vehicle, whereas low kilometers will normally increase its worth.
- Understand a trade-in’s value can be negotiated and may vary between dealers.
A consumer who still owes money on a vehicle being traded-in should call their lender to obtain the loan payout (amount still owing). Many dealers will do this for their customers, but consumers should verify the payout.
Note: OMVIC’s Code of Ethics, the Consumer Protection Act and the Sale of Goods Act requires dealers to remove liens on trade-ins as soon as possible. OMVIC urges consumers to be mindful of early warning signs that indicate the loan on a trade-in was not paid in full. Should a payment be deducted from a consumer’s bank account for a payment on a vehicle traded in, contact the dealer and the financial institution. If that doesn’t rectify the problem, the consumer should immediately contact OMVIC’s Complaints and Inquiries Team. Should a dealer offer to make the monthly loan payments on a customer’s trade-in, rather than pay off the loan in full, consumers should understand this is a significant risk and contact OMVIC at once.
A Trade-In’s History
Dealers are required by law to ask a customer trading in a vehicle to sign a trade-in disclosure document outlining important information about the previous use, history and condition of the trade (e.g. previous accidents), as the dealer is legally required to give full disclosure to anyone they then sell the vehicle to.
Protect Your Identity
Much of the technology in today’s vehicles is designed with a driver’s and passenger’s convenience in mind. Many of these computerized features require vehicle owners to input personal information; information that should remain private. So before trading in a vehicle consumers should:
- delete garage door opening codes
- delete the vehicle’s stored phonebook/contacts (and any other information that has been paired with a cellphone)
- delete saved addresses/searches from the navigation system
- remove documents from the glovebox/door pockets/etc. that might contain personal/private information