Personal Finance: Off With The Old And (trade-) In With The New

PERSONAL FINANCE: TRADE-INS
Off With The Old And (trade-)
In With The New

All you ever wanted to know about trade-ins, but never quite managed to get under one roof. A BT bare-it-all.

By Vinod Mahanta

Anyone with even a cursory interest in pulp fiction of the kind where a bunch of amateurs are forced to kill someone who isn't particularly nice can tell you that they (the amateurs) almost invariably face their biggest challenge in disposing the body (of evidence). Nope, this isn't a snappy advisory on how an aggrieved small investor can do away with an unctuous broker. But it does have something to do with the art of disposing of something to one's profit. Like a car.

Take the case of customers who picked up, say, a Maruti Zen in December, 1997. That was before the market was swamped with Santros, Matizes, and a million variants of the Zen itself, not to mention a rash of mid-size cars. Today, at least some of these customers would wish to upgrade to another small car, even, a mid-sized one. They, and others like them who own eminently-serviceable Ambassadors, Maruti 800s, Santros, Esteems, Matizes, Cielos, and Ford Escorts are certain to feel the urge to move on to better cars. The question is: how do they dispose of their cars?

True, tapping the second-hand market is an option, but most customers quail when it comes to negotiating a transaction with used-car dealers (axiom: most used-car dealers are greasy). Enter trade-ins. Inspired by the exchange schemes made popular by consumer durable-manufacturers, trade-ins are just what the words say-the customer identifies the car he wishes to purchase; approaches a dealer; trades in his old car; and walks out with the new. What's more, bulk of the trade-in schemes on offer are company-sponsored.

Thus, Ford has a Ford Assured trade-in programme in Bangalore, Chennai, Pune, Ludhiana, and Jaipur; gm, a General Motors ok in Hyderabad and Indore; Mercedes, its 'pre-owned Mercedes' one; and Honda Siel, a Honda AutoTerrace. And the sweep of these trade-in initiatives is close to universal. Ford Assured accepts all cars except the Omni, Ambassador, and Premier Padmini; and gm, all, except the Ambassador, Premier, Omni, and Gypsy. And Maruti Udyog is slated to hit the market shortly with its own trade-in initiative.

For customers, trade-ins are an attractive proposition. Avers Hormazd Sorabjee, 36, Editor, Autocar India: ''Indian customers are accepting the trade-in as a legitimate way of acquiring a new car. Dealing with a company has a comfort level of its own for the customer.'' That apart, a trade-in is the perfect next-step in the marketing repertoire of auto-makers. Dealerships today do not just sell cars and accessories, but also finance and insurance schemes. Says Saji Philip, 35, Marketing Manager, Honda Siel: ''We believe in providing a single-window all-inclusive service to the customer. Until now, this included sales, service, and finance, but there was no provision on disposing old cars.''

Is it a fair deal?

If you are one of those street smart customers who can put one over the local used-car dealer, rest assured, trade-ins aren't for you. For the methodology-yes, there is one-used by companies to put a value to your old set of wheels is strictly scientific. Ford Assured has a 116-point checklist; gm, a 110-point one. The final price is arrived at by factoring in existing market conditions. Thus, if you have a Premier Padmini that is in great shape, and has done a mere 12,000 km, do not expect the dealer to value it too highly. That said, customers can be far more certain of a better deal when they opt for a company-sponsored trade-in instead of heading for the nearest used-car lot. Says Rohtash Mal, 45, General Manager (Marketing), Maruti Udyog: ''Legitimising the pricing mechanism is critical to gaining customer confidence.''

So, is there anything that the customers can do to influence the sale price? The evaluation process carried out by companies involves parametric tests of critical components. No amount of cosmetic dressing-up, therefore, will help. However, first impressions do matter. In general: clean cars command better value than filthy ones; cars where all mechanical parts work, than those where some don't; and those where the engine makes less noise, than cars where it sounds like a dying asthmatic. These simple things are well within a layman's control. And a customer who chooses to trade-in his old car for a new one, can drive into a dealership in his old car, and drive out in a new one. Now, all that remains is for the finance companies to tie-up with auto-dealerships offering trade-ins to launch refinancing schemes, where a customer can trade in a two-year-old financed car, and move to a different repayment scheme, albeit with the same finance company that funded his initial purchase.

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