Car dealers have a bad reputation for good reason. This series of articles is dedicated to a long list of tricks that car dealers use to get more money out of customers than they want to pay. As an ex-Internet Manager for a major car dealer, I saw first-hand how subtle some of these tactics can be. Even so, they cost unwitting customers hundreds, even thousands of dollars more than necessary.
The trick we’re looking at is the Independent Trade Value. Dealers provide, via their own website, figures from an independent authority offering the value you can expect for your trade. It’s an actual company, but the values they provide are well below the generally accepted standard you can expect to get for your car when you trade it in at a dealership.
Buyers should be doing their homework prior to visiting a dealer. The current standard for valuing used vehicles is Kelly Blue Book, found at www.kbb.com. KBB is truly independent and provides used car values based on actual sales in your geographic area. Use KBB to establish the value of your trade prior to walking in the front door of your car dealer.
Figures Don’t Lie
The example we used was that of a 2006 Honda Civic EX sedan with automatic transmission and 50,000 miles. KBB valued the car’s trade-in value at $11,300. I went to a dealer’s site and used their “independent authority” to value my trade. They quoted a range of $6,860 to $9,595. At the low end I’m losing over four thousand dollars, or 39 percent, compared to what I should get. At the high end I’m still out 14 percent, or $1,605.
If a dealer offers me the high end of their range, and if haven’t done my homework, I think I’m getting a great deal when I’m really being taken to the cleaners. If I accept a figure on the low end of their range, and some people do, the loss I’ll take on my trade will need to be added to my new car loan. Under the best of circumstances that loan will now cost me about $80 per month (for five years) more than it would have if I had received a fair price for my trade. An expensive price to pay for not doing your homework!
The Dark Side
There is another dark side to many of these independent trade value websites. They require you to register with your name, phone number, and email before they provide you with figures. I hate to be the bearer of more bad news, but this is nothing more than a lead generator for the local dealer. The dealer pays this independent source for your contact information in hopes of making the sale and what is known in the business as “stealing your trade.”
Don’t Be Fooled
KBB provides information without requiring you to register, and their figures are based on actual sales in your area, not skewed so a dealer makes more profit. Always walk into a dealership prepared. If the deal presented doesn’t feel right, stand up and walk out. Do your own research and be comfortable with the deal or just say no.
Stay tuned for more dealer tricks.