How Do Trade-Ins Work at the Car Dealership?
Dealers get most of their used-car inventory from customer trade-ins. It is common for a customer who buys a car to trade in his old vehicle. Selling your car privately is also an option, which would get you more money most of the time. Market conditions have much to do with trade-in value; for example, convertibles may not see a decent trade-in value just before the winter months. Many factors go into a trade-in value amount.
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Car Shopping
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Dealers prefer that you pick out a car that you want to buy before giving a trade appraisal for your vehicle. Many feel that if a number is put on your car and given to you, you'll shop the number to different dealers, giving another dealer the upper hand to ultimately win your business. Once you pick out a car, you are asked a series of questions about your vehicle, such as your vehicle mileage, VIN (Vehicle Identification Number), pay-off amount, accident history and whether you bought the vehicle brand-new.
Appraisal
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A trade appraisal is done by a manager at the dealership. She goes over your vehicle in detail to determine if it has been in an accident and test drives your car to determine whether it needs mechanical work. She checks the tires, the brakes and may check the oil or other fluids to judge whether you have maintained the vehicle, all to gauge how much money must go into fixing your car before resale. An accident history reduces your trade-in value.
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Offer
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You're made an offer based on wholesale value once your appraisal in complete. Resale potential is considered, which is not unusual---dealers are in business to make a profit. If you search Internet appraisal sites, such as Edmunds, you can gauge your trade-in amount based on trade-in value. Appraisal methods are simply guides---the dealer ultimately decides your vehicle's worth. The dealer considers current market conditions. If gas prices are high, your gas-guzzler may not warrant a high trade-in value because it is likely to take longer to sell the vehicle. The initial offer is somewhat negotiable.
Pay-Off and Numbers
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If you owe money on your trade-in, the dealer pays the loan off to own the vehicle. This amount, if more than the car is worth, rolls over into the price of the vehicle you are buying---if the pay-off is lower than the vehicle appraises for, the profit goes towards your new car figure. Your vehicle numbers are then presented to you with the trade-in amount, and pay-off amount included, if any. You provide your title to the dealership to complete the sale, and the dealer pays off the loan, if there is one.
After the Trade
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Once the dealer owns your vehicle, he may retail it or sell it at auction. If he retails it, you might see it advertised for thousands over what you traded it in for. This is not unusual, and does not mean that the dealer tricked you. Inflation is simply a starting point of negotiations, not an actual sales price.
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References
Resources
- Photo Credit Headlight on new car image by steven Husk from Fotolia.com
