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Save Thousands of Dollars at Trade-in Time by Considering The Trade-in Value When Buying a New Car
Author: Ralph M

For identical monthly finance payments, some cars will depreciate less than others and at trade-in time save thousands of dollars for the far-sighted owner

Getting residual values
This will take a little homework and shoe leather.
1. Identify several cars having similar features that can be leased for similar monthly payments.
2. Note and write down the residual value of the cars.
3. If you’re not married to a brand name (most cars today have similar high quality) then if features are similar, go with the car having the highest residual value

The Internet may not be the best place to try to get this information. Surveys show that 60% of people looking to buy or lease a car do some searching on the Internet. This has made the manufacturers less willing to disclose residual values. In fact, some of the Big Three (GM, Ford, Chrysler) will not print them in a quotation from the dealer.

Residual values risks

  • These values are at best educated guesses
    Residual value amounts are made by companies (or the car's manufacturer) as to what the car will be worth after a certain number of years. It is not a value you can take to the bank. The manufacturer might even inflate the value in order to increase the sale of leased cars, where by increasing the residual value the monthly lease payment is decreased a little bit and may be more completive vis-à-vis another make of car.

  • Check popular publications
    If you sense from popular publications (newspapers, car magazines, etc) that the car is not selling very well and that there is a big push to get rid of inventory, then assume that the residual value might in fact be as much as 10% less than the actual value ought to be.

  • Other risks in residual value accuracy
    This risk is present matter what two cars you select for comparison. Between now and, for example, three years from now, a competitive model might pop up that makes your current prospect a real dog by comparison, thereby decreasing its residual value. But that is true about any current model. So don't worry about that, as you are only trying to compare two residual values knowing that both are in danger of being similarly different in the next three (or 4, or 5 or 6) years.

  • Residual values from the Internet
    Although the Internet is jammed with card sites offering residual values, they are mostly approximations. The largest automotive database I know of ($50,000 annual license fee to use) offers residual values for each of four different geographical areas of the United States. In the Northeast U.S. it offers one set of values for the western half of a State and a different set for the eastern half.

Therefore the only reliable value is the one you get from a local dealer. All the rest are really an average. Manufacturers are uniform in not giving out residual values to third parties, so one has to wonder where the Internet sources get them.

Decide on term of ownership
Before asking for the residual value of the lease, decide on how long you plan on owning the car. Leases are offered for up to five years, or 60 months. Just be sure to get a residual value for the number of years you plan on owning the car.

By Federal law all pertinent financial data must be provided before signing a contract.
Ask any salesperson for a lease offer, and insist on the residual value. He may give it to you only verbally, since every effort is being made to hide this from you. Insist on it, and they will deliver the value. Say Thank You and move on

If you get a hard time from the dealer or his salesperson, here is the law you can quote

Note: For the sake of brevity, much of the material has been omitted as not relevant to residual values, but may be seen in whole om the Internet searching for Regulation M, then look for sub paragraphs as follows:

Regulation M Consumer Leasing Sec. 213.4 Content of disclosures
For any consumer lease subject to this part, the lessor shall disclose the following information, as applicable:

4) Residual value. The residual value, with a description such as the value of the vehicle at the end of the lease used in calculating your base [periodic] payment

This means you have legal right to the residual value, under Federal Regulation M

Financial gain
For any two vehicles, whether a Sedan, Van, SUV, or light truck, costing about $25,000, it is not unusual for the trade-in value after three years to differ by up to $3,000. This is money that stays in your pocket. So the effort to do this fact finding before buying the car is handsomely rewarded.

Financing terms
The interest rate that determines the monthly payment is immaterial. All that is to be compared are two cars for which the monthly payment is essentially identical, and then develop an estimate of what each might be worth in x number of years.
It's essentially money-in vs. money-out. If you pay the same monthly payment for car A as for car B, will car A cost $3,000 more to trade it in for the new model A than if you had bought car B?

Copyright 2006 by Beacon Data LLC All rights reserved

Article Source: http://www.myarticlepub.com - Free Reprint Articles

Ralph is an author of automotive articles for people who want to save money when leasing or buying their next car. Visit his web site at www.autotruckdata.com Learn how to Calculate Lease paymentsand find the car with the highest automobile resale value and visit www.autotruckdata.com

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