Used Car Trade In and The Buyer’s Market: Time To Buy?

by Jacques Sprenger on December 17, 2008

One of the recession’s consequences: a buyer’s market. Is it time to consider a used car trade in? Is it time to buy new, now that some things have better value?

Have you ever had someone cajole you into doing a trade in for your vehicle? This has been the situation for me lately.

I Was Offered A Great Deal

The dealership where I bought my truck 2 years ago keeps sending me offers to buy back my vehicle at the original MSRP minus $0.10 to $0.55 per mile, depending on the wear and tear. Since I only have 15,000 miles in 2 years, I figured the discounted amount as approximately $3,000, which represents a very good deal for me. The only condition is that I must buy a new or used car from the dealership.

used car trade in, buyer's market
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Would You Buy In This Buyer’s Market?

The letter they sent me insists that they already have clients anxious to buy my used truck (pick-up), a claim that I find suspicious indeed in these trying times. So why are they pushing me to trade in my car? Because hardly anybody is buying new cars or because lots of people are looking for good used vehicles? Maybe both. In any case, if they don’t come up with some shenanigan at the last minute, I stand to make an excellent deal. So, is it time to buy a new car? Or a new house for that matter, given the many opportunities available?

Here’s an argument for being a “buyer” at this time: the pressure is on the Detroit automakers to start making money, especially after they receive any form of bailout from the government. With credit already showing signs of being loosened, this could only bode well for us consumers, maybe creating an atmosphere that’s conducive to buying autos… an atmosphere that encourages you and me to start parting with our cash to help nudge this economy along towards recovery.

Even the foreign brands will feel the pressure if clients flock to GM, Ford and Chrysler (by the way, I would never again buy a Chrysler car, no matter what the deal may be; they have shown time and again that they can’t make quality cars, even when Mercedes-Benz took over), and will thus cause the markets to continue to shift in favor of consumers. So the question remains: should you buy a car or house given the present conditions of the market (ultra-favorable to buyers)? Well my answer is: it depends.

Things To Consider Before A Used Car Trade In or Big Purchase

Just because it’s a buyer’s market doesn’t mean we should be snapping up bargains willy nilly. You’re not necessarily saving money just because you buy something on sale or something that’s relatively more affordable. You’d be wasting your money if you buy something you don’t exactly need just yet.

Some things to weigh before purchasing any big ticket items:

1. What will the extra debt load be like?

Do you think your job is secure? Do you have cash for a decent down payment? Does it make sense to take on new debt now? I think about these questions as part of my decision-making process. Even if I accept the fabulous trade in deal that Nissan is offering me, I would create new debt, to the tune of around $25,000 (I still owe $10,000 on the present truck; the net difference on the new vehicle is $15,000). Sure, they also offer 0% for 3 years and a generous cash back, but the total debt would still increase considerably.

2. Do you really need a new thing-a-majig?

If you answered the job question as “Yes, I feel secure in my present job and I have a decent down payment available”, then the considerations must be: do I really need a new car or will the present four wheels take me wherever I want to go for the next 2 years? The economic downturn has brought an end to the American love for snazzy cars. People now just want something reliable and cheap; they no longer want to impress the Joneses. We can extend this thinking to spending and purchase decisions involving other big ticket items.

3. Is now really the best time to buy?

Unless you’ve put more than 60,000 miles on your present truck or car, don’t fall prey to the temptation. Safeguard whatever cash you have saved in safe financial havens like internet bank accounts or a high yield savings account like Ally Bank, and ride out the economic storm. As far as buying a new house, forget it for the time being. We’re all still anticipating the signs of a stock market bottom and the trough of the economic recession; so how about giving it another 6 months before shopping for the best deal. For now, paying rent is a lot better than potentially facing foreclosure.

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{ 2 comments… read them below or add one }

1 sara February 7, 2009 at 9:42 pm

i have a hyundai sante fe 2004. I have bad credit, the car is in my boyfriend’s name, i can’t afford to make the monthly payments and get insurance. By the time i pay it off, I’m flat broke. They charged 17000, i owe about 14000. I want to get something i can afford without having too much interest. How is the easiest way of going about this???

thanks sara

2 SVB February 8, 2009 at 9:58 pm

First, do you have income? Make sure you have some form of income. Try to not spend your money on unnecessary things and make saving a priority.

See if you can find a car through places like your local Craigslist or through other classified ads. You can sell your car this way and buy directly from someone else through Craigslist, but you’ll have to make sure the car you buy is functional if it’s going for a really good price. I got much better deals this way than through a dealership.

There are also places that auction off cars, but you have to be careful about using online resources because of the risk of getting scammed. Typically though, you can get good prices through these avenues.

See if you can arrange financing through the seller.

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