What Happens When I Trade in My Car?

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Buying a new car can be exciting for most people. Frustration exists, though, with the process. One reason is due to the negotiations that occur whenever a trade-in is part of the process. New car buyers desire the most money possible for their old cars, and automobile dealerships invariably want to pay as little as possible for them. If you're not careful, trading in your old car could become an exercise in futility.

Significance

  • For automobile dealerships, used cars can be big business. In fact, many dealers make relatively small profits on new car sales. However, the profit from used cars sold on the lot can be significant. For example, a dealer may make between $300 and $500 on a new car, if he's lucky. A used car, though, can bring in $4,000 or more, especially as the previously-owned car market continues to grow and expand.

Considerations

  • No automobile dealer would last long if he didn't try to pay as little as possible for your trade-in. That's because dealerships are expensive propositions. Dealers have already bought every new car sitting on their lots. And they owe the bank money for those cars. This particular cost is known as a dealer's floor plan, and it can be huge. New car sales aren't usually sufficient to cover those costs. Selling used cars, though, can help greatly.

Process

  • After you've decided to include your old car as a trade-in, the dealer will appraise the vehicle for its value. This value will normally be the car's wholesale value as listed in the dealer's current Black Book (or Kelly Blue Book). It's at this point that a dealer will try to hold the line on a trade-in, while you'll try to get more for it. It can be done, but it'll take some work.

Warning

  • Never accept the dealer's first offer on your trade-in. That's because he's usually built in room to move on that offer, sometimes by significant amounts. Several reasons exist for why the offer might be low. One is that the dealer has to spend money on reconditioning the car for resale. Offer to have it reconditioned yourself if he'll give you what you want for your vehicle. Present retail and private sale values printouts for your car, if needed.

Expert Insight

  • A dealer can make quite a lot of money off of your trade-in. If you want maximum value for your trade, you should be willing to bargain hard for it. You should also never discuss trading in your car until after you've agreed on the purchase of your new one. After that, bring up your trade, and be prepared for some give-and-take on its value. Chances are, the dealer might eventually raise his offer.

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