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There are a lot of mistakes a buyer can make when purchasing a new vehicle. Not shopping around for a better deal, not waiting for a sale, not test driving the vehicle, not taking into account extra costs like maintenance, and so on. While not haggling for a better deal may seem like the worst mistake, it actually isn’t. The worst car buying mistake you can make may surprise you.

New vehicles depreciate the moment it is sold and driven off the lot. That depreciation varies from model to model as some vehicles are more desirable than others. For example, over a two-year period a vehicle like the Chevrolet Malibu may depreciate more than a GMC Sierra 1500. This is where you can make the biggest mistake by trading in your relatively new vehicle for another.

2017 BUICK VERANO

Let’s take a hypothetical example. A 2019 Chevrolet Malibu LT has an MSRP of $27,695 and you manage to haggle $3,000 off the price. Add in 12% taxes (disregarding the dealership/environmental fees in this example), and the “out the door” price is $27,658. Essentially you saved yourself from paying the taxes in this deal, not bad.

But after a couple of years, the Malibu doesn’t suit your needs anymore. You decide to upgrade to an SUV and want to trade-in your Malibu for that new SUV. On average a mid-size sedan will lose up to 40% of its value in the first two years of it being driven off the lot. What's more, trade-in values will always be lower than the market value of a used vehicle because dealerships have to make money off of vehicles they buy. So by trading in you vehicle and the dealership giving you $16,700 for your trade-in, you lost almost $11,000 in a 24 month span from your “out the door” price. That’s almost 4 times the amount you managed to haggle off of the original price.

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This is just an example and as mentioned earlier, depreciation values vary drastically from model to model. But this is the biggest financial hit to a buyer if they decide to get rid of their relatively new vehicle. This can be made worse if they are underwater with their loans, as in, the value of the car is less than the remaining balance on the loan. Those in this situation will have to roll-over large amounts of negative equity into the next loan or lease and/or bring a lot of money to the table to close the gap between the payoff amount and the trade-in value.

However some tips to avoid buying a car that you may not keep for a long while are to properly assess your budget to make sure you can afford it, do a thorough test drive to be sure it fits your needs now and down the road, and finally consider buying a used car that has already gone through some depreciation. But the best way to avoid taking a big financial hit and getting the most out of your vehicle is to keep it as long as possible.


Eagle Ridge GM – Coquitlam, British Columbia

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