As a Jalopnik resident car buying expert and professional car buyer, I get emails. Lots of emails. I have selected a few of your questions and I will try to help you. This week we are discussing used VWs that have never been driven and how they work when your trade-in is worth more than the car you buy.
First of all, how come there are so many used VWs that still seem to be “new”?
“One thing I’ve noticed everywhere is the mind-boggling number of new 2014-2018 Volkswagens for sale. I mean with any car you can find a few unsuitable from a few years ago, but I’m talking tons and tons of VWs. Why? That does not make any sense. They are also at all the different dealers. What is happening? A majority are marked as CPO but they are all less than 100 miles on the clock and have no registered owners. They are all all over the country and I am so confused as to why there are so many leftovers.
Why is nobody buying them? Especially with the shortage of cars. You could get such a good deal.
This one made me curious, so I did a nationwide search for used 2014-2018 VWs and then sorted by low to high mileage. The first four pages of results were cars with around 100 miles or less. As to why these used cars appear to be “unused”, what probably happened is that when the car was new it was on the lot too long, the dealership marked the car as “sold” to obtain credit for the sale probably in order to achieve revenue for the month. This car is then moved into the used fleet and usually marked as CPO.
However, despite the fact that you have used cars with low mileage, most of these units are not really “deals”. The majority of these cars have asking prices close to their original MSRP. Keep in mind that these are now three year old cars, and although VW is 6 years old/ 72,000 The mileage guarantee was very generous for the 2018/2019 model year cars, paying almost retail for a “used car” doesn’t seem like good value to me.
Then, how should the calculations work when the trade-in is worth more than the car you’re buying?
“How does it work when you trade in a vehicle with a higher value than the new one?” Especially if you have positive equity and owe less than the dealer’s business value?
Lately I’ve been thinking that maybe I could take the equity on my 2019 Subaru STI and trade in for something smaller, cheaper (and a lot better on gas) like a Miata. Because Miata is always the answer, right? Now I think I was very, very wrong about that idea.
Most people trade in an old car for a newer one. This older one is usually worth a lot less than the new gloss at the dealership. If the exchange is still funded, and if the buyer is upside down, that difference rolls into the new loan. Been there done that. I was young and stupid.
But what if the situation reverses? Trade in value is higher that the MSRP of the new car?
I currently owe $ 29,500 on my STI. A local Mazda dealership offered me $ 33,500 for my trade-in on an MX5 with an MSRP of 31,000 at 0.9% interest. Without an additional down payment, this resulted in $ 580 per month for 60 months. Something was wrong about it. I walked. By my calculations: $ 580 for 60 months at 0.9% means the loan amount is around $ 34,000. I understand that the exchange saves me around $ 2,600 in taxes, so I can’t understand how they went from 31,000 to 34,000, especially if I’m positive for $ 4,000. No breakdown was provided so I can only guess what I’m being asked to pay. Is it that fancy croupier calculation? Am I missing or forgetting something simple? What am I not understanding here? “
In this particular case, when you have equity in your car but have a loan balance, you simply take the equity amount and reduce it by the selling price of the vehicle. Then add your tax and DMV for a full total. In most states, if the value of the trade-in is more than the replacement purchase, you won’t pay any tax. I agree that the calculations you provided do not add up and am only assuming that the dealer “packs” some extras like warranties and service plans at that total price to increase the cost. As you pointed out, they didn’t provide a breakdown, so you’ll want to keep shopping and find a store that will disclose the numbers honestly.
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