Trade in now or when Telluride is delivered?

[Hal]

As many have said, there are many factors that influence this decision. I'm going through the same dilemma as we speak.

A big part of the equation is how your state handles new vehicle sales tax with a trade in. In Texas, where I am, tax is calculated on the selling price of the vehicle being purchased minus any allowance given for a trade, regardless of the amount owed on the trade. For example, if the vehicle being purchased is $50,000 and the trade allowance is $30,000 you'd only pay tax in Texas on the remaining $20,000. Tax rate is 6.25% which works out to $1,250. If you sell your vehicle elsewhere rather than trading it in, you'd pay taxes on the full $50,000 purchase price in Texas, which would be $3,125 (a difference of $1,875).

Some things to consider:
* Can you go months without the vehicle you'd sell?
* How much tax savings would there be by trading it in versus selling elsewhere?
* How to the offers from dealerships compare to other car buying services like CarMax, Carvana, Shift, and Vroom?
* How much would the value have to change between now and then to make selling now more profitable for you?

In the above example, assuming the trade values are the same at the dealership and elsewhere, it is $1,875 more profitable to trade the vehicle in. The value of the trade would have to decrease by at least that much by the time your Telluride arrives in order for selling elsewhere now to make sense. Unfortunately nobody can accurately predict what the market is going to do. Even if every single component that's in short supply now were to magically appear in stock it'll take time for that to translate to pre-pandemic vehicle supply (and, consequently, prices/values).

That is where I am at. Right now my tax implication would be about $2000 if I don't trade my 2020. I figure if the value of my 2020 stays about the same I just need for the dealer to come in around $2000 less than VROOM when mine comes in. I will also print off and have in my pocket if needed, what others are selling my 2020 for in case I need to put out there how much they stand to make, or loose if they don't put their best foot forward... Of course all things will be relative when my 2022 comes in. I am not the type to get into a pissing match, if they don't want it, fine by me. Just easier to trade....

 

[tuffgonger]

Even without the entire market correcting, a Kia dealership may not offer anywhere near the same as a recently IPO’d startup with no need to show profit every quarter yet which has billions in capital.

Absolutely correct. My dealer was offering $5k less for my trade-in than what I got from the KBB office on the same day. Certainly, I would have fought the $5k diff, but I doubt it would have been close. As was said earlier, consider your situation and throw the numbers in Excel to see if it makes sense.

 

[Whitten66]

Look at tax implications also, in PA you only pay tax on net sales so $50k new car with $20k trade is 6% of "30k.

That is really good to know. The dealership where I ordered my Telluride in Western Pennsylvania will not value my trade in until shortly before the delivery date in late September. I had planned on investigating companies like CarMax and Carvana to see what type of trade in value I could receive. However, with the 7% sales tax (there is an additional 1% local sales tax in Allegheny County), I would be looking at a difference of almost $700.00 between trading it in at the dealership (sales price of almost $50,000.00 minus a current blue book median value for my trade in of $11,200.00) versus selling it to CarMax or Carvana.

For the people who have requested offers through CarMax or Carvana, when is it too early to start requesting offers just to explore what they are offering? I wouldn't want to sell my vehicle until a week or so before I get my Telluride, and my understanding is their offers are only good for 7 days. I don't know if it would affect me adversely if I would request weekly offers for my vehicle leading up to the 7 or so weeks I have left before my order arrives.

 

[jreinig]

I received my Telluride about 3 weeks ago and waited to sell my Mazda CX-9 until this week. Put an add on Facebook marketplace and sold it in under 24 hrs for my asking price which was in the middle of private party estimate on KBB. This used car market is so hot, do a little extra work and pocket $1000-2500 more for sure.

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[NCBill]

Used cars right now are at all time bubble pricing. IMHO, they have no where to go but down. Since you can live without the car for a while, I'd contact all the typical used car buyers out there, Carvana, Carmax, etc., plus the dealer you are buying your new car from to get top dollar offers. Wholesale used car pricing has recently dropped, after month after month increases.

Even if the dealer you are buying from does not want to make the trade now, just tell them: "I am going to SELL my car NOW. If you want it, its available. It will not be available later."

The high prices of used cars may finally be dropping: Sonic Automotive president

Used car prices are at all-time highs, but there are signs that may change as new car inventory improves despite continued semiconductor chip shortages.

www.cnbc.com

The used car price drop is accelerating

The Manheim Used Car Index dropped for the second straight month in July signaling a coming reduction in retail prices from record highs.

www.foxbusiness.com

 

[zander1555]

It’s worth watching what used car buyers pay week by week. I’d say get an estimate on your truck every week from carvana, vroom, and carmax. If you see 2-3 consecutive weeks of lower and lower offers, it might be time to sell your truck, considering your Telluride is probably at least 2mo out. That is, if you can go without that vehicle. If you can’t, well you’re kind of out of luck.

I was just in this position recently. Telluride was a month out and we got a better price on our GMC at Carmax. However, in AZ you only pay sales tax on the net value of the car deal, so it made just a little more sense to trade it in. Luckily the market didn’t change all that much by the time the Telluride arrived.

 

[Nay12x]

I received my Telluride about 3 weeks ago and waited to sell my Mazda CX-9 until this week. Put an add on Facebook marketplace and sold it in under 24 hrs for my asking price which was in the middle of private party estimate on KBB. This used car market is so hot, do a little extra work and pocket $1000-2500 more for sure.

How does it work when you owe 23k left on a truck and value is at 36k?

 

[Hal]

Used cars right now are at all time bubble pricing. IMHO, they have no where to go but down. Since you can live without the car for a while, I'd contact all the typical used car buyers out there, Carvana, Carmax, etc., plus the dealer you are buying your new car from to get top dollar offers. Wholesale used car pricing has recently dropped, after month after month increases.

Even if the dealer you are buying from does not want to make the trade now, just tell them: "I am going to SELL my car NOW. If you want it, its available. It will not be available later."

The high prices of used cars may finally be dropping: Sonic Automotive president

Used car prices are at all-time highs, but there are signs that may change as new car inventory improves despite continued semiconductor chip shortages.

www.cnbc.com

The used car price drop is accelerating

The Manheim Used Car Index dropped for the second straight month in July signaling a coming reduction in retail prices from record highs.

www.foxbusiness.com

Waiting for my 2022 to come in, my 2020 EX just dropped $2K on Vroom. Still more than I paid for it so all good.

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[MG535]

How does it work when you owe 23k left on a truck and value is at 36k?

A licensed dealer such as a franchise dealer or Carmax, Carvana etc should be able to pay off your auto loan and hand you a check for your balance.

A private party individual would probably need you to pay off the loan and obtain title and lien release letter.

 

[Waiting4Rain]

That’s what I’m saying, I could get by not having the truck. As I have a work truck and don’t drive the personal truck as much. Tough decisions sometimes

My wife and I had the same situation. She had a 2013 Ford Edge, and we decided to sell it to the local Ford dealer a month or so ago. We still have two vehicles (a Sonata and a '97 Silverado) so we figured we could get by for a while as we wait for our '22 Telluride. When the Telluride arrives, I'll sell the truck and we'll still with the two vehicles. I can't speak to the tax implications, but the demand for used vehicles is so high that we felt this was the right time to sell the Edge.

The sales process was a hassle due to the dealer's buyback process, but I will say that it was nice to be sitting on the other side of the table for a change, and holding all the cards. In the end, we got the price we wanted, and it puts us in a great position to pay off a chunk of the Telluride up front.