Part exchange
If you’re looking to get a new car and have an old one that you’d like to sell, then you might consider a part exchange with your dealer. But what is it, and how does it work?
What does part exchange mean?
Part exchange describes a way of part financing a new car. You and your dealer will come to an agreement to offset the value of the car you currently own against the one you want to buy. Many car dealers accept part exchange, but not all. It’s worth asking ahead of visiting the dealership whether this is a deal they’d be happy to accept.
The best way to think about part exchange is that instead of receiving cash for your car, you’re receiving money off the cost of your next car. The amount you’ll save on a new car by part-exchanging your used car will depend on how much the dealer thinks it’s worth. For example:
You go to a car dealership and see a car you want that is valued at £10,000.
Your car is valued by the dealer at £7,000 based on factors such as age, model and condition of the car. (This may be different to the amount you would receive for a private sale).
The dealer might offer to take your current car off your hands, and subtracts the £7k value from the cost of the next car you want to buy.
This leaves you with £3,000 to pay instead of the initial £10,000.
Advantages
Convenience vs private selling – Finding platforms to sell your car on, setting up listings and then taking the appointments for people to view your car can be very time-consuming. It can sometimes take weeks, or even months. However with part exchange you can go to the dealer and get the ball rolling right away.
Lowers payments for your new car – A huge advantage of part exchange is that it's a great way to part finance the cost of your next car. This is really helpful if you don’t have a large amount of money saved up to buy.
Disadvantages
Might get less money for your car – If you decide to part exchange, you might get less for your car than you expected to. With private selling, you get to set the price you expect, while a car dealer is likely to try and negotiate a lower sum with you. This is because they still want to make a profit on the car once they sell it on to another buyer.
Not everyone enjoys the negotiation stage – If you’re not accustomed to selling your car, you might feel some discomfort negotiating a price with your car dealer. They might have a price in mind to offer you that might not be what you were expecting. Pushing back on their offer and asking for more can feel quite stressful.
When looking at buying a used car from a dealer, you may have seen some cars marked as 'part exchange to clear' and wondered what it means.
The term, sometimes referred to as 'PX to clear', means that the dealer most likely took the car in on a part-exchange arrangement, but wishes to sell the car quickly – so they may mark the price down to attract buyers. Some of the reasons they might want to get rid of a part-exchange car quickly include:
Not worth the time, effort or money making repairs to the damaged vehicle
The model is not a particularly desirable one
The car has a high mileage that lessens its value