Automotive

Should you trade in your old car or pay a down payment?

car dealer

If you’re buying a new car in the UAE, then usually you’ll consider trading in your old car as part of the process. It’s convenient and all you have to do is drive to a dealership, sign a few papers and you can leave with a brand-new car.

But just because it’s convenient does it mean it’s the better option financially?

When trading in your car, a dealer is actually agreeing to buy your old car from you at a specified price, and applying that price as a down payment credit towards the purchase or lease of your new car. Most car dealerships in the UAE accept every make and model of motor, so if you want to treat yourself to a shinier model then you know any dealership will take your old car off you for a guaranteed price.

There are benefits to trading in your old car – convenience is the obvious number one. Any documentation that is required for you to sign, or obtain, the dealer will organise as much as they can and the whole process of handing over can be done at the desk.

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Trading in becomes especially useful if you don’t have enough money for a down payment (you usually have to provide at least 20% of the total price). The money you get from your current vehicle can be classed as the down payment and then you will have to pay off whatever is left.

But before you even consider trading in your car then you should get your car apprised first. This can help when it comes to handing over the car. When you know how much your car is actually worth and not how much you want for it, you’ll be wiser when talking to a dealer. You’ll also know whether the car dealer is offering a good deal.

Obviously if you’ve kept your car in good condition you will most likely get a higher trade price. But more often than not, you’re trading in a car you’ve had for a while and it’s inevitable to avoid high mileage and a few scratches. Often the amount offered by the dealer is much less than the worth of the car. So, you will probably lose some money in the process, you should expect a low offer. The dealer must spend money on fixing up your car and they still want to make a profit at the end of the day.

If the difference between the total worth of the car and the trade in amount isn’t equal then there are always other options on how to buy your new car.

SEE ALSO: 5 summer car care tips to beat the UAE heat

Selling your car privately is more of a hassle but you’ll probably end up getting more money for your old motor. With that money, you can then put towards a down payment.

While selling a used car on your own can prove profitable, it can also be challenging. Simply giving the car a wash and hanging a new air freshener won’t cut it. Fixing low-maintenance items like worn brake pads, weathered tyres and rusted rotors requires little to no time and shows buyers you have taken good care of the car. People want ready-to-drive cars, not something that will cost them extra money later on.

Having some of your own money invested in the car, you’re building equity in the vehicle. If you’re paying for the car through an auto loan, putting down a cash down payment shows that you are able to handle a financial responsibility. Keeping in mind that your monthly car payments could be lower as well if you’re able to put money down on your purchase – the bigger the down payment the smaller the loan you might end up with.

If you’re taking out an auto loan then using a down payment will be beneficial in the long run, but sometimes having spare cash lying around isn’t always the case. If you arrange a trade in then you need to do your research beforehand, be prepared with an estimate of the value of your car and shop around before you take the first asking price – a few hours of research could save you cash.

If you’ve just got a new car however you paid for it, you need to make sure it’s covered. Click the link to compare and buy the right car insurance policy for you!

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