Part of building wealth is deal making. Buying assets, selling assets, moving money around, and using debt and interest to your advantage.
But there’s a problem.
Negotiating and bargaining is a dying art in North America. Most of us walking around out there don’t have a lot of opportunities to practice the skill. Walmart won’t haggle with you. You have to go out of your way to find ways to practice your deal making skills.
The bigger the deal, the more important the skills. If you’re selling a house, or a business, your lack of experience will hurt you.
Selling a car is the perfect training grounds. The dollars involved are big enough that you’ve got skin in the game, but not big enough that it’ll break you if the deal winds up in the other guy’s favor. You can learn how to do it yourself, or you can learn how to use a third party — both of which are good options and experience that will help you down the road.
The Third Party – Car Dealerships
Selling or trading your vehicle almost always means less money. But making the most money isn’t always the biggest concern. Any other option is going to cost you more time. You might need to liquidate funds quickly (you need cash right now). You might be working on something bigger (you need the time for your career/business).
If you’re selling a vehicle and buying a vehicle, that will suck up twice as much time. Dealerships are often willing to offer higher trade-in value than they would offer for a purchase. Maybe you’re family is growing and you need a bigger personal vehicle. Maybe you’re business needs a truck or a van. The point is that you privately you have to cut two deals, where as with the dealership you can work them into one.
Third party dealerships handle legal paperwork. They can offer warranties, maintenance packages, and a few other value-adds. The main benefit is your time. If maximizing your available time is more important than maximizing the dollars in your pocket, this is the best option.
It’s also your first taste of dealing with an intermediary. Selling houses or businesses quite often involve working with one or more professional that goes between buyers and sellers. This is an important skill all on it’s own. Get comfortable with the idea that this is a person providing you a service and that they work for you.
This is where you step into the arena yourself.
Most articles on selling a car make the point that selling privately is the way to get more cash for your car. They fail to point out that there’s also a greater chance of getting less cash for your car simply because you don’t know what you’re doing and you make one of a dozen possible mistakes. Here are the basics to selling your vehicle:
- Determine Your Vehicle’s Worth – Your car’s current market value is an important factor when determining whether to sell privately or trade. Research what cars similar to yours currently bring on local car lots and online, and compare that with the market value. Then set your price to be competitive. To calculate your vehicle’s current market value, refer to Kelley Blue Book, NADA Guides, or Autotrader.com.
- Gather the Necessary Paperwork – This includes the car title, bill of sale, any maintenance records, warranty documents, and a release of liability form. The last document is important to release you from any legal liability for damages incurred or breakdowns after the vehicle is sold.
- Shine It Up – Clean, well-maintained cars easily demand a higher price. Wash and wax the exterior, and thoroughly clean the interior including the windows. Replace damaged or worn items like floor mats. Replacing these items at a small cost can boost a vehicle’s value and appeal.
- Advertise – Take interior and exterior photos of your vehicle from different angles, and create an ad. Craigslist, work intranets, auto traders, stuff like that. Include your asking price, the vehicle mileage, vehicle condition, any special features, and your preferred method of contact. Advertising on various venues will place your ad before different audiences and increase your chances of a sale.
- Screen Potential Buyers – The most tedious part of the process is false-starts. You’ll definitely have people that will show up, ask to test drive, ask a thousand questions, and then tell you they’re not interested. It’s not a waste of an hour if it gets you closer to a buyer, but it’s not fun either. Set up test drives for serious buyers only. Ask for their full name and make it clear what types of payment are acceptable (example, no monthly payments).
Selling a Car With a Lien
A lienholder is an individual or financial institution that holds the title to your vehicle. This could be because the vehicle is financed and not yet paid off, if the vehicle was used in a transaction as collateral, or if there are unpaid repairs. In these cases, the vehicle is not fully owned by the person selling it. The lien needs to be settled before it’s sold, otherwise the buyer is taking on the responsibility for it.
You don’t want to pay off someone else’s obligations – nor should you make someone else pay off yours.
Use the car’s VIN number (they’re in different places, so a search online to find out where to find it on a given vehicle). Use the number to do a lien search, go online or go to the local DMV.
If the seller is found out to be lying about there being lien on the car, the deal is probably over. Trust in negotiating is more important than anything. Settle the lien before selling a vehicle, and make sure liens are settled before buying a vehicle.
- Know your car’s value – Knowing the value of your car and the asking price for similar vehicles allows you to negotiate from a position of strength. Don’t accept less than what others are getting for similar vehicles in your area.
- Have your pitch ready – Find out what a potential buyer is driving and what they need, and highlight the benefits of your vehicle that meets their needs. What you have for sale is always better than what they have, or they wouldn’t be looking at it.
- Have a price in mind – Start with a price higher than what you are willing to accept. This leaves room for negotiating. Have your lowest acceptable amount in mind, and stick to it. Don’t be afraid to start high and push back on offers.
- Be ready to walk – Don’t be afraid to close the negotiations and walk away if the buyer isn’t close to your price. Buyers who aren’t serious candidates waste your time. And, walking away can sometimes convince a prospective buyer to give in and pay what you ask.
The best time to sell is when you don’t need the money. Or put another way, if you’re desperate for cash, you’re more inclined to strike a bargain that’s not in your favor. Likewise this is true for buying a vehicle – if you need a car now you’re more likely to spend more than you have to. Treat this as an exercise in gaining the skill managing large transactions – your financial future will thank you for it.