High Trade-in Prices Do Not Equate to Good Value – Buyers Beware

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The recent under-supply of COE has put a crunch on new car sales volume, resulting in accelerated competition in Singapore's automotive market. To make the sale more attractive, many dealerships have introduced overtrade options. Hence, sgCarMart sends its editorial team down to investigate and find out if overtrading is as good as it seems.

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The recent under-supply of Certificate of Entitlement (COE) has put a crunch on new car sales volume, resulting in accelerated competition Singapore's local automotive market. To make the sale more attractive, many dealerships have introduced overtrade options. This means that on top of the usual trade-in valuation for their current car, new car buyers will be able to get an additional sum known as the overtrade. Dealers, however, will inflate the price of the new purchase when an overtrade option is offered on the new car.

Is high overtrading value as good as it seems?

As such, a market research was conducted on the misconceptions about high overtrade prices. A number of authorised distributors were contacted regarding their overtrade policies. Majority of them have initiated that even in situations where buyers do not trade-in their current vehicles, the overtrade prices can be offered as a discount – a direct deduction off the retail price.

A 1.3-litre Honda Jazz that was registered in August 2008, with around 63,000km on the clock, was used to illustrate a comparison. Premium Automobile, authorised dealer for Audi cars, revealed that an $11,000 overtrade (with financing options) would be given with the purchase of an A6 model. This means trading in the Honda Jazz will earn a $55,000 rebate off the retail price – which seems attractive on the surface. In actual fact, with the figures given by Premium Automobile, the Honda Jazz would have sold for only $44,000.

On further probing, Premium Automobile stated that buyers would get to enjoy the same amount of discount even if there was no trade-in car.

Similarly to Audi, Regent Motors, authorised dealer for Ford cars, also offers the overtrade value as a direct discount off the retail price in the event of a sole-purchase without any trade-ins.

When enquired about the same example with a number of pre-owned cars dealers such as Kruise Auto, Mayfair Motoring and Car World Automobile, quotes up to $48,000 – a sum of $4,000 more compared to trading-in with authorised dealers were received. A quick check on sgCarMart.com shows that a typical seller advertises $51K for a similar Honda Jazz (in terms of age, mileage etc).

Director of Car World Automobile Pte Ltd, a used car dealer located at the Automobile Megamart commented, “For new car buyers, it makes more sense to sell the car to us as we offer better prices than authorised dealers. The sale of their current car should be kept as a separate deal from their purchase of a new car.”

Other than the numerical evidences that were gathered from car dealers and online car portal sgCarMart.com, a direct sale (car owners putting up a sale of their cars through means of online or publications) will usually fetch a higher price than trading-in during a purchase transaction. This makes sense as it does without the salesman cut on the trade-in.

Perhaps it will make more economical sense if owners were to sell off the current ride directly to fetch a higher value, since the overtrade discount can be enjoyed without a trade-in.

About SGCM Pte Ltd

sgCarMart.com is Singapore’s Number 1 car site. With more than 10,000 car listings, it offers the largest database of new and used cars for sale in Singapore. sgCarMart.com attracts more than 2 million visitors every month and as a testament to its popularity, it has been awarded the Most Popular Automotive Site in its category for six years running by Hitwise. Attaining the Successful Entrepreneur Award 2011, Singapore Prestige Brand Award 2010 and the Spirit of Enterprise 2008 serve as recognition to sgCarMart.com’s reputation as a well established Singapore brand.

For enquiries, please contact:    Julian Kho
                Associate Editor
                DID: 6744 1514
                HP: 9336 8485
                E-Mail: Julian.kho (at) sgcarmart (dot) com

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