As Jalopnik’s resident car-buying expert and a professional car shopper, I get emails. Lots of emails. I’ve picked a few of your questions and will try to help out. This week we are discussing used VWs that have never been driven, and how it works when your trade is worth more than the car you are buying.
“One thing I’ve noticed everywhere is the mind-boggling amounts of new 2014-2018 Volkswagen’s for sale. I mean with any car you can find a few misfit ones left over from a few years prior, but i’m talking tons and tons of VW’s. Why? It makes no sense to me. They’re at all different dealerships too. What’s going on? A majority are marked as CPO but they all have under 100mi on the odometer and have no reported owners. They’re all throughout the country and I am so confused as to why there are so many leftover ones.
Why are no one buying these? Especially with the car shortage. You could get such a good deal.”
This one got me curious so I ran a nationwide search for used 2014-2018 VWs, then sorted by mileage low to high. The first four pages of results were cars with about 100 miles or less. As to why these used cars look to be “un-used” what likely happened is that when the car was new it sat on the lot for too long, the dealer marked the car as “sold” to get credit for the sale likely in order to hit some sales figure for the month. That car is then moved into the used fleet and usually marked as CPO.
However, despite the fact that you have pre-owned cars with hardly any miles on them, most of these units are not really “deals.” The majority of these cars have asking prices near their original MSRP. Keep in mind these are now three-year-old cars, and while VW’s 6 year/72,000 mile warranty was very generous for 2018/2019 model year cars, paying almost full retail for a “used car” doesn’t strike me as a good value.
“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 trade in value the dealer is offering?
Lately I’ve been thinking that perhaps I could take advantage of the equity on my 2019 Subaru STI and trade down for something smaller, cheaper (and way better on gas) like a Miata. Because Miata is always the answer, right? Now, I think I was very very wrong about this idea.
Most people trade in an older car for a newer one. That older one is usually worth significantly less than the shiny new one at the dealership. If the trade in is still financed and, if the buyer is, upside down, that difference gets rolled into the new loan. Been there done that. I was young and stupid.
But what happens if the situation is reversed? The trade in value is higher than the MSRP of the new car?
I currently owe $29500 on my STI. A local Mazda dealer offered me $33500 for my trade on a MX5 with an MSRP of 31000 at .9% interest. With no additional down payment this resulted in $580 per month for 60 months. Something didn’t seem right about that. I walked. From my calculations: $580 for 60 months at .9% means the loan amount is around $34000. I understand the trade in saves me about $2600 in tax so I can’t figure out how they got from 31000 to 34000 especially if I’m positive by $4000. No breakdown was provided so I can only guess what I’m being asked to pay for. Is this that fancy dealer math? Am I missing or forgetting something simple? What don’t I understand here?”
In this particular case when you have equity in your car but have a loan balance you just take the equity amount and reduce it from the sale price of the vehicle. Then add back your tax and DMV for a complete total. In most states, if the trade-in is valued higher than the replacement purchase you would not pay any tax at all. I agree that the calculations you provided aren’t adding up and I would only assume that the dealer is “packing” in some extras like warranties and service plans to that total price to drive up the cost. As you pointed out they did not provide a breakdown, so you will want to continue shopping and find a store that will disclose the numbers honestly.
Got a car buying conundrum that you need some assistance with? Email me at firstname.lastname@example.org!