Car dealers serve a useful function, even though some can be a pain to deal with. One area of useful service that many car buyers are thankful for is the fact that dealers take trade-ins. This saves many car buyers the time, effort, and aggravation of trying to sell their old car on their own.
Trading your car will probably cost you money. It’s generally assumed that you can get more for a vehicle selling it privately than you can trading it in at a dealership. How much will it cost you to trade? Let’s find out.
2006 Honda Civic
In Part II we learned that Kelly Blue Book (www.kbb.com) reflects actual used car values for each geographic area of the country. Let’s use the example of a 2006 Honda Civic EX sedan with automatic transmission and 50,000 miles. This is how KBB.com breaks out the different values for this Civic in the San Francisco Bay Area:
- Trade-in value: $11,300
- Private Party value: $13,580
- Suggest Retail value: $15,780
If I were going to trade in my car, I would expect to get $11,300 from a dealer in my area. If I did the extra work to sell it privately, I would get more: $13,580. The difference between the two is $2,280. All things being equal, this is what it will cost me to trade my Civic at a dealership.
The final figure that KBB provides is the Suggested Retail value, which is the initial dealer asking price when they turn around and sell my trade. This is not necessarily the actual selling price, but the initial price before negotiations. If the dealer gets their asking price they can make a gross profit of $4,480, less the cost to get the car ready for sale.
2008 GMC Yukon SUV
Let’s look at a more expensive model: a 2008 GMC Yukon SLE with standard features, 4-wheel drive, and 40,000 miles. This is how KBB breaks out the figures on a Yukon in excellent condition in the San Francisco Bay Area:
- Trade-in value: $29,175
- Private Party value: $32,400
- Suggest Retail value: $36,000
I could expect to receive $29,175 after all the haggling if I traded my Yukon. But I would probably get $32,400 if I sold it privately. The difference of $3,225 is the price I’ll pay for trading versus selling. What will the dealer do with my SUV? Ideally, they will offer it for sale on their sales lot for around $36,000. If they get their asking price they stand to make $6,825 after the cost of getting the SUV ready for sale.
Remember that these figures will vary depending on the vehicle, the dealer, the deal, the time of year, and so on. The figures will also vary depending on how good a negotiator you are compared to the dealer if you are trading, or the buyer if you’re selling privately.
Is it worth giving up cash out of pocket to trade your vehicle? Only you can answer that. Tomorrow we look at the other side of the equation: selling your car privately.
The author is not only a contributor to this website, but has written the only comprehensive guide to selling your car online: HELP! I Gotta Sell My Car NOW! New Rules for Selling Your Vehicle Online. The book is available on Amazon.com.