Don't Be So Negative

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With everything going on around us today, trade-in vehicles have hit an all-time high in regard to negative equity, in the month of April. According to Edmunds, 44% of new vehicle sales that included a car being traded in, had negative equity. In April, the average was about $5571, an increase, compared to $5036 that was reported from April 2019. A possible reason is that the months of March and April, the used car market plunged due to the pandemic. However, it is expected to change this month as coronavirus restrictions are slowly lifted and people are going back out. Numbers are already showing an increase in numbers compared to April. Understandably, dealers are currently hurting and looking for ways to boost interest, I think that if thought about in a different light, we can take this is a creative opportunity to generate some sales.

So what we see right now is that interest rates are insanely low in hopes of incentivizing buyers to be in the market. Many manufacturers are offering 0% interest to qualified buyers on many of their models. Yes, you do have to go with their captive bank, but for zero interest, I’m game. It’s free money. This could be seen as an opportunity for someone to trade in their 1 or 2-year-old vehicle, who has a 6% interest rate (for example) and possibly get into a new one. You can potentially lower your payment, ultimately save thousands of dollars in the long run.

Unfortunately, those who currently was at the break-even point, or slightly positive side of the equity, could unknowingly be in the negative right now. Therefore, if you are the type of person who likes to get into a new vehicle more often than not, this might be the time to make some moves. With massive discounts and little to no interest rates available, you can potentially save yourself thousands of dollars. Statistics show that the average interest rate for loans (that included vehicle trade-ins), was about 4.7% in April of this year compared to 7.3% in April of 2019.

Generally speaking, trading in your vehicle with negative equity is not usually the best idea, but the market is so funky right now, it might not hurt. A large number of the deciding factors would relate to the vehicle you are currently in, the condition of the vehicle, and the one you would want to get yourself into. As a dealer, and you know you have clients who can benefit from this, or have clients who swap out of vehicles regularly, why not reach out to them and see if they are interested in speaking with you about their options? All it takes is one phone call to open the door to a new opportunity.

Author: Christine P.
Date: Jun 12, 2020