Can I trade in the car I bought during the pandemic? If this is you, you’ll want to read on
Thank you all for the comments, emails, and phone calls about the last few articles regarding electric and hybrid vehicles. This month, I recount a recent unfortunate story to highlight some pitfalls to watch out for due to the lack of dealership inventory caused by the microchip shortage. If you bought a car at these high prices, you’ll need some luck trying to negotiate a trade in.
Introducing Steve and Sarah from Beaverton. Back in 2020, they purchased a new Kia Telluride and since it was in the middle of the pandemic, they paid $15,000 in additional dealer mark-up with zero discount. Regardless, they wanted the Kia so badly, they traveled to Seattle and purchased the car. Fast forward to April 2022 and the addition of their special needs child, the Kia Telluride no longer worked for them and so they contacted me to help trade it in for something better suited to their family.
Here is where the story turns scary. Upon investigating a replacement vehicle for them, we found that there was just about no way to get them out of the Kia Telluride and into the new car. It seems with the Kia’s rapid depreciation and the large dealer markup they paid two years ago (well over the MSRP), Steve and Sarah had nearly $20,000 in negative equity! And since they had little to no money to put down for the new vehicle they wanted, there was absolutely no way to help them at all. Even if a lender would approve a loan on a new vehicle, their monthly payments would be well out of reach in order to pay off the negative equity from the Kia.
On a side note, when I asked them why they purchased the Kia Telluride in the first place, they simply said that the Kia commercial on TV was amazing and since no dealers locally had any in stock, they figured it must be super popular and a good buy. Note to readers: research is important but watching a commercial is NOT research.
To end the story, Steve and Sarah will unfortunately have to keep their Kia and continue to make the payments until the car is about 5 years old. At this point, the car will be worth about 55% of the original MSRP (not counting the additional dealer’s markup) and they can trade it in for something else at that time.
This story is not to single out Kia. This is true with most vehicles that sell for thousands over MSRP due to vehicle shortages. There are many folks who will face a similar bad situation with purchases made during the COVID 19 Pandemic. The good news is that the plateau of the buying frenzy has already begun and I’m sure we will hear more and more about it as the auto industry cools down.
Thank you all for reading. I appreciate all of the responses!
In the event anyone is in search of a new or pre-owned vehicle, please let us know. We would be honored to be of assistance. Plus if you currently have an unused vehicle you would like to sell, we can help with that too. We can be reached at firstname.lastname@example.org