Car Negotiation Coach

When you get a lower than expected trade-in appraisal at the dealership, it can be tempting to stop negotiations.  You may believe you could get a better offer somewhere else.  While this may be true, you must remember to factor in tax savings to perform a true comparison. 

Most states will credit the value of your trade-in when determining the purchase price for sales tax calculations.  This can result in a nice discount off the total amount you’ll pay.  If you were to sell your car independently, you would not be able to take advantage of this savings.

Remember this trade-in formula:

      trade in value times 6%* = tax savings

 *Sales tax varies from state to state, so use your own state’s tax %, but 6% is the norm.

For Example

If you were to buy a $25,000 car and had a trade-in worth $15,000, your sales tax would be on $10,000 instead of the full $25,000.  If your tax rate is 6%, that would result in a savings of $900. If your appraisal is up to $900 less than what you could get independently, you’re still better off selling to the dealer. And of course it’s less of a hassle as well.

      $15,000 X .06 = $900

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You may not be familiar with CSI, but believe me car dealerships are intimately aware of this term.  CSI (Customer Satisfaction Index) is a rating system for car dealerships.   

You know that survey your receive in the mail after buying a car?  It’s collected by the manufacturer and converted into a score to rate both your salesman and the dealership.  Manufacturers ask new car buyers about every aspect of the car buying process from the professionalism of the salesman, cleanliness of the dealership, to the selection of vehicles in stock.   

So why do you care about CSI?

Because it’s important to car dealers and therefore it should be a tool in your negotiating tool kit. 

This score can affect bonuses earned by both the dealership and individual salesmen.  It can also affect how many cars are released to a dealership by the manufacturer.  Salesman are so anxious for a positive score, you’ll often be coached before you leave the dealership to answer the survey with the highest possible ratings.  But take notice that it will not be brought up until after negotiations are over.  This is because it can become a negotiating chip in your favor.

How can you use CSI to your advantage?

As a smart buyer, CSI won’t come up in conversation while you are negotiating car price.  That’s because you won’t be talking with a salesman, but instead negotiating with multiple car dealers over email.  However, after you’ve settled on price, you’ll still need to negotiate your trade-in and financing at the dealership.  This is a great time to mention the survey. 

You want to be subtle, but point out you are aware of the importance of the CSI score.   Before you hand over your keys, state that if you get a good value for trade-in, you’ll be happy to complete any customer satisfaction surveys you receive with the highest possible marks.  Simply by acknowledging the CSI score, your salesman may be more flexible negotiating trade-in and financing.  What have you got to lose?

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What are you going to do with that old car when you buy a new one? 

There are more options and considerations than you might think.  You’ll probably get the most money if you can sell it to a private party, but a trade-in could actually net you more because of the tax implications.  Donating to charity might give you a warm fuzzy, but you might just need someone to haul it off your front lawn so you can see your neighbor’s trailer again.

Below is a flow-chart to help you figure out how to get rid of your old car.  Before you get started, go to Edmunds and find out both the trade-in value and the private party sale value.  You may also want to get an online appraisal from a used car dealer or Autotrader.com. The online appraisal number will likely be lower than the Edmunds trade-in number, but it will give you an idea of exactly how much you would get if you had to sell today.  Participating car dealers are required to honor Autotrader online appraisals provided you are factual about the condition of your car.

A Flowchart to Determine How to Get Rid of Your Old Car

There are a few generalizations in the above chart, but hopefully it helps with your decision making process.  If you’re feeling really generous and want to give a $5,000 car to charity, by all means go ahead!  Just be sure to understand the tax law before you try to write-off any large numbers.  There are also hundreds of charities that will accept these donations and some are better than others, so do your research.  Lastly, if you decide to trade-in, make sure you read these steps to get the most money for your trade-in.

Here are a few more resources to help:

• *How to calculate the tax savings when trading-in your car
• Get estimated trade-in and private party values from Edmunds
• Vehicle donation tips
• Free junk vehicle removal

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