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Guide To Part Exchanging a Car

Conventional wisdom dictates that part exchange is the easiest, but not necessarily the most cost effective option for buying new and used cars.

Part exchange usually involves exchanging your car for another more expensive vehicle which is paid for in part by the proceeds of the sale of your old car.

Car Sales 2018The attractions of part exchange are plain to see. By negotiating a selling price for your car with a motor trade dealer, based on its age, condition and service history, you can avoid the time consuming rigmarole often associated with selling your car privately.

Instead, once you have arranged to pay the difference between the part exchange value and the cost of your new car, in cash or by taking out finance, you can then hand over the keys, vehicle log book and MOT certificate, then drive away in your brand new vehicle purchase.

Of course, you will also need to transfer your existing insurance policy over to your new vehicle, for which you may be charged a small administration fee.

Note that the part exchange value of your car is not the same as the trade value, the true cash value, simply because of the nature of part exchange. Part exchange is a two-part transaction, involving the sale of one vehicle and the purchase of another.

It is, perhaps, only naturally to focus on the price you are offered for your old car, but what is more important is the difference between the part exchange valuation and the cost of your new car, otherwise known as the ‘cost of change’.

It is not uncommon for motor trade dealers to artificially inflate part exchange prices by an amount known technically an ‘over-allowance’, this is so they can reduce the price of a replacement with a similarly inflated price tag by the same amount.

However, as long as you know what the ‘cost of change’ is, you can satisfy yourself that you have secured a good deal before you sign on the dotted line.

Traditionally, notwithstanding the additional ‘legwork’ involved in selling a car privately, it was generally accepted that cash buyers fared better financially than part exchange buyers when buying new and used cars.

However, according to the inaugural survey of car dealers published by digital marketing specialists CarGurus in early 2019, the landscape of the used car market in the UK is changing and likely to continue to do so.

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According to the ‘One Voice’ survey, over four-fifths of the used car dealers who responded – reported that sourcing the right stock, which is the right cars at the right prices, was far more difficult last year (2018).

Consequently, with relatively new well maintained used cars in short supply and the UK economy facing an uncertain future, dealers are increasingly likely to give precedence to part exchange buyers and offer better deals than was previously the case.

According to the Society of Motor Manufacturers and Traders, in the second quarter of 2019, used car sales fell by 2.8% year-on-year to just over two million, but that was still a strong result when compared with new car sales, which fell by 3.5% in the same period.

The number of used and nearly new cars entering the market is still struggling to meet solid demand at dealerships, so most retailers are likely to continue their focus on part exchange sales throughout the rest of 2019 and beyond.