Good, Real-world Trade-In Advice!

Ever wonder why you can get your trade-in appraised at five different dealer, and get five different offers? It'll drive you crazy!

Here's some basic real-world trade-in advice from me, a local Thumb Area guy that's been in the auto business for 25+ years. Some of it might sound harsh, but it's straight to the point. Please be open-minded and take this information into consideration. It can only help the next time you're looking to trade in your car.

First and foremost... NEVER, EVER base your final buying decision on the trade-in offer only! Always, always, always look at your bottom line out-of-pocket amount after trade, taxes and fees! (See example near the bottom)

Do your homework and know your car's values! Google (or use whatever search engine you prefer) your exact year, make and model that you're looking to trade and see what pops up. It'll make your head spin, but stay calm! What you're going to want to do is see what your vehicle is actually selling for in your area (actual selling prices, not Kelley Blue Book). Remember though, that retail values (selling prices) and trade-in values are way different! Retail values take into consideration a fully serviced, repaired and detailed vehicle that is being offered for sale by a licensed dealership. Sometimes this "get ready" process can cost thousands of dollars depending on what the vehicle needs to make it right. Trade-in values are typically 10% - 30% below retail value, depending on the condition (see "Your Car's Condition" below) of the vehicle and the model itself. If you're being offered a "retail" value on your trade, then chances are you're paying WAY too much for the vehicle you're looking to buy (see "Over-Allowance" below).

To give you a good idea of Retail vs. Trade-In, here's some examples as of September 2014 using NADA as a guide:

2006 Chevy Equinox LT All Wheel Drive with 91,000 Miles

NADA Retail $6,925

NADA Trade $4,425

36% difference

2006 Ford F150 XL Standard Cab 2wd with 44,000 Miles

NADA Retail $10,988

NADA Trade $ 8,463

23% difference

2011 Dodge Journey Mainstreet with 28,000 Miles

NADA Retail $16,850

NADA Trade $13,900

18% difference

"But I still owe $x,xxx..." Please remember that your trade value has absolutely nothing to do with how much you owe on it! Just because you might owe $18,000 on a car that's actually worth $16,000 doesn't mean that you're being "ripped off" or "low-balled." After all, if you owed $0.00 on your trade, is it worth $0.00? Not at all! I'm guessing you owe more on it because you probably put very little money, if any, down on it when you originally purchased it, or you rolled over some negative equity from your trade-in (knowingly or unknowingly) when you purchased it, or you're trying to trade it too soon after purchasing it.

Your Car's Condition. Please be honest with yourself about the actual condition of your trade-in! If it has problems, and you know if it does, then you must accept the fact that those problems will affect it's trade value. If the brakes pulsate, the tires are bald, the A/C blows warm, there's dings, dents, rust and other damage all over it, the seats are torn... you get the idea... The more work it needs, the less it's worth. Maybe one out of 100 trades that we appraise don't need much fixing up. The other 99? Well, they always seem to need some kind of repair/maintenance or reconditioning. Remember, we have to recondition it and make it safe before we even offer it for sale.

Things to watch out for when shopping:

The ever famous line..."We'll give you $2,000 for your Push Pull or Drag car!" These dealers are not doing anything but increasing the price of every vehicle by $2,000 to accommodate for this. Do you really think they're actually giving you $2,000 for your $300 salvage car? They're not. Don't buy into it. You're smarter than that!

The... "We'll pay off your trade no matter how much you owe!" line. By law, all trades have to be paid off when ownership changes hands. Yes, they'll pay it off, but it doesn't mean they're actually giving you that same amount. They're just tacking on the difference, if any, on to your price.  Don't fall for this trick.

Over-allowance. This is when a dealer "shows" you more than what they're actually giving you. For example, your paperwork might state $5,000 for your trade, but what they're not telling you is that they're actually only giving you $4,000. The extra $1,000 is just coming out of their inflated profit on the car you're looking to buy, or they're tacking it on the price without your knowledge. This way they can brag to you about how they're giving you a lot more for your trade than the other dealer(s).  If it seems like you're getting more for you trade than even you think you should be getting, you're paying for it somewhere.

If their trade offer changes with different cars on their lot, they're playing the "over-allowance game" with you. To get a REAL offer on your trade, ask them to just buy it from you without you buying anything from them. Then and only then, will you get their real price, IF they're even interested in talking to you anymore.

Over-allowance might look pretty on your paperwork, but you usually end up paying more in the end because their inflated price = more tax.

Look at this simple example: 

Real Pricing with a Real Trade value vs. Inflated Pricing with an Inflated Trade value:


You can see, if you blindly chose the higher trade-in "deal" because it looks like they're giving you $2,000 more than the other dealer, it actually ends up costing you $120 more than if you went with the real pricing.  This is why you NEVER only look at trade value to make your purchasing decision.  ALWAYS look at your out-of-pocket amount - which is also call your "difference"!

Please remember this little blog the next time you're looking to trade in your car.  It'll only help ease the whole process and you might actually have fun buying your next car!

Scott Mrozek

E-Business Director

Categories: Advice