In well-developed automobile markets in the Western world, such as the US, trade-in is considered one of the strongest marketing tools. From the customer’s point of view, the ability to sell the agency the older car at the time he purchases the new car serves as an incentive, especially at a time of surplus supply in the used car market.
From the agency’s point of view, the used car, purchased at a good price, can later serve as a source of profits, aside from the sale of the new car. It is estimated that about 70% of new car sales in the US are directly or indirectly connected with a trade-in deal.
In contrast, in Israel, the trade-in has achieved little success in the automobile market. The reasons are apparently a basic suspicion of the method, as well as loyalty to the "Blue Book" system and the blue-book price. Most people prefer to try and sell their cars themselves on the market and receive a higher price for the car, even if the waiting involved delays purchase of the new car.
However, the trade-in department is a useful marketing tool for even the most prestigious car market in Israel, in which cars sell at $60-100,000 and more. Jaguar provided an example of this last week in publicly announcing the initiation of a trade-in service for the company’s cars, and detailed its inventory.
It isn’t hard to understand the incentive for the customer interested in purchasing a luxury automobile. The luxury car market in Israel is relatively small, just a few hundred units, and used cars suffer from a relatively fast rate of depreciation in monetary terms. A new luxury car may lose NIS 60,000 or more in value in its first two years.
In addition, in the instance of luxury brands relatively new to Israel, there still is not a large enough market for the used cars for the formulation of a real blue book price for them. Therefore, giving the used car to a trade-in service saves the car owner a large amount of valuable time and running around.
The great unknown in this process is the customer who buys a second hand luxury car from the trade-in service. Common sense tells us that the customer with NIS 200-300,000 to spend on a car would choose a new car, not second hand. However, apparently there are customers for this service, if not too many.
Avi Aroch, marketing manager of UMI, says there are instances where a customer has his mind set on a specific model but cannot afford a new car of that model. In that case, the trade-in offers the customer the chance buy the dream car, usually in better condition than what is on the open market.
Yoav Harlap, the importer of Mercedes, says some customers purchasing these cars use the trade-in to raise the stakes from the cheaper model they currently drive. In this manner, the customer can offer the older vehicle for trade-in, and by adding NIS 70-80,000 to the price, can walk away with a larger, second-hand vehicle.