Real World Examples Of A Used Car Trade In & How You Can Get More For Your Trade
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Trading in a used car is probably one of the most despised parts of buying a car, truck, van or suv. So let's look at this part of the car purchase from a different perspective....one that will help you get through this a bit easier and allow you to get the most money for your used car or truck.
Let's start with some Automotive Lingo -
Trade-In is another word for Wholesale.
And Wholesale is another word for Auction.
So, when you want to trade in your car, an Auction price is what you’ll be given.
That's the exact reason why normal folks like you and me have problems with a dealership about our trade in.
Many of us have an emotional attachment to our car. We think our car is the nicest one there is.
Let me be as gentle as I can with this....it’s not.
A large dealership sees hundreds of cars and trucks a month and if you approach the trade-in with that frame of mind, you are going to be disappointed.
Think of it this way....why would a car dealer give you $2000 more for your car...than what they would pay for it at auction? Doesn't make much business sense, does it?
Here's several common scenarios regarding used car trade ins -
- You have a popular car you're wanting to trade in that's in average condition (99% of all cars, trucks, vans and suvs are average). So, expect to get an "average" price for it. The only time you'll get more for a particular vehicle is if it's on that is in very high demand, or it's very rare.
- You're talking to several dealers and one Dealer is offering $1,100 more than the others for your car. Well, that's great, right? No, it's not.
The hair-on-the-back-of your-neck should be standing on end. This particular dealer is playing “Hide the Dollars”. You are not getting a “good deal” – you’re probably paying more than you should for the new car because the Dealer is playing games with available Rebates and Incentives. - If you are still paying on the vehicle you are considering trading, you have 2 -3 years left on the loan, and didn't put a lot down, you're most likely to be “upside side” or in a negative equity position.
In other words, you owe more than the car is worth. The dealer doesn’t cover that loss - you do. Don't expect a Dealer to "help" with that difference by giving you bunch more for your car. You have to take care of that difference by either taking money out of your own pocket to cover the loss or rolling the loss into the new car loan.
The Best Source For Used Car Trade In Values....And How To Use Them The Right Way
When trying to determine the value of your trade, I’d suggest only three public sources - Kelley Blue Book, Edmunds and NADA.
Try kbb.com Used Car Trade In Values first, then head on over to both Edmunds Used Car Trade In Values and NADA Used Car Trade In Values.
Just provide your zip code when asked - it's important because values are different in various parts of the country.
Here are a few really important tips when appraising your car online.
During the online appraisal process, you’ll be asked to grade your vehicle. Your choices are poor, fair, good or excellent.
I want you to burn this into your brain right now - there are very, very few excellent cars, trucks, vans and suvs that get traded in.
In fact, I saw only one in my years in the business - 2001 Nissan Altima with 600 miles. It was traded in 2 weeks after it was originally purchased because the guy that bought it....died.
I couldn't even begin to tell you how many people tell a car dealer their trade-in is excellent when it needs new tires, new brake pads and $300 of paint repair.
So, carefully review what poor, fair and good actually mean when you visit KBB, Edmunds and NADA....and be honest in your opinion. More than 90% of you will find that your car or truck falls in the "fair" to "good" range.
Once you have your figures from the 3 web sites, just take the average. If a dealer offers anywhere near that figure, you're in business.
If you have a little time on your hands and want to get the most accurate source for trade-in values, pick up the phone and call a couple of Dealers that sell the Brand you own.
Ask them for the “Black Book” value on your vehicle. The “Black Book” is a publication put out by the Hearst Corporation. They’re a huge company that owns major newspapers, TV Stations, Radio Stations and Magazines.
The “Black Book” is a publication that details the Average Auction (remember, that's another name for trade in) prices for every vehicle sold in the U.S. It’s printed monthly and set-up to represent the various geographical areas of the Country. You can buy the Black Book yourself if you wish – it’s a yearly subscription and it’s pricey.
I suggest you just pick up the phone and ask a few Dealers what the value is for your vehicle – for a vehicle in fair to average condition.
You’ll know within a couple of hundred dollars of where you stand - and whether you’re in good-shape or bad-shape in regards to your trade-in.
Other Important Advice To Remember
TIP: If you've considered selling your car or truck yourself, buy changed your mind, I want you to take a step back for a moment. Spend a few minutes reviewing our guide - sell you car yourself and pocket an extra $1,500 to $3,000 more. It really isn't that hard.
TIP:If your vehicle is at the 80,000 mile mark on the odometer, expect to get less than the fair value that KBB or the Black Book gives it.
The reason – many manufacturers and their certification processes will only warranty or certify a vehicle with less than 80,000 miles. It can’t be resold as a “certified’ vehicle with that many miles.
The result – the dealer will have difficulty selling it. Most likely, they won’t even try. Your vehicle will end up at auction and be sold to the secondary markets, i.e. Small, Privately Owned lots or Buy-Here-Pay-Here lots.
TIP: If your vehicle has reached the 100,000 mile mark and beyond, it’s an automatic auction car. Be prepared for a lousy value.
In fact, you’ll probably be offered considerably less than the fair value that KBB gives it. Why? Because that’s all the Pre-Owned Manager will get for it.
TIP: If your vehicle is 7 – 12 years old, and the trade-in figure is low, consider this - Donate it to a recognized non-profit (Charity Group) and take the allowed Federal tax credit when you file your taxes the following year. I can help with this – I have the federal requirements and the names of several worthy non-profits. To find out more, see our guide to Donating A Car
TIP: If the State you live in offers a Tax Credit, it can be a huge benefit. For instance, if you are an Ohio resident and are purchasing a new vehicle for $30,000 and your trade-in is worth $10,000, you only pay taxes on the difference between the two. It looks like this:
$30,000 Purchase - $10,000 Trade-in = $20,000 Taxable X Ohio 7% Tax = $1,400.
Without the Trade-In the Sales Tax is $2,100.
You would net $700 if you traded the car in. That means $700 less to pay on the new car transaction. Or, think of it as getting $700 more for your trade.
TIP: One more thing – I know that several “leading experts” have advised that you hide the fact that you are going to trade a vehicle in.
They suggest you negotiate the new car price first. Then they suggest you say “by the way, I have a trade”. Supposedly, you will get a lower price on the new car by not tying the two vehicles together.
I don’t agree – and the reason is this. If you plan to use the Internet to shop, the really good Internet and Fleet Managers (see our New Car Prices & New Car Quotes Guides for more info) don’t have the time to negotiate for hours. You’ll typically get very close to their best price in the first communication.
If you try to introduce the trade later in the process, the Internet Manager has very little room on the price of the new car and no room on your trade. You’ve wasted your time as well as theirs.
If you're dealing with a good Internet or Fleet Manager, be upfront with them and tell them about the trade. I guarantee a very pleasant experience.
Have Fun!
I do have an obligation to point out that not all Car Makers, Dealers, Salespeople, Insurance Companies and Banks are greedy or crooked. This site is dedicated to honest Companies and their Professional Employees who've grown weary of the ignorant and classless giving the automotive related industry a black eye......a black eye that I feel is very close to being permanent.
By using these new and used car guides, I hope to be able to help you find the Best Businesses, and the Professionals that represent them, with very little effort on your part and help you....
Save More Money and More Time Than You Ever Have Before.
It is also my hope that these Companies and the Professionals that represent them will have more business than they can handle - a reward they justly deserve.
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Tom O'Leary - "A Concerned Dad....and Automotive Analyst"
New Car Purchase - Exceptional New Car Purchase Advice and Automobile Purchase Strategies for your next new car or used automobile purchase.
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