Car Buying Tips: Valuing Your Trade At A Car Dealership

By L James Johnson

L James Johnson

Contributing Writer BIO

L. James Johnson joined the automotive industry after winning recognition as a radio & TV journalist and running three thriving, fast-growing small... More

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1,140 views Oct 8, 2010

Cadillac dealership

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You've decided to buy a new car. Following my advice in previous articles, you have contacted multiple automotive dealers in your area by email. After completing initial price negotiations that way, your car search is narrowed to three dealers. All three have come down significantly in price and are sitting within a hundred dollars of each other at just over the invoice cost of the car. So far so good. However, before you’ll know the net selling price, you need to deal with the trade value.

Trade Values

It can be difficult getting a dollar figure on your trade from a car dealer via email or over the telephone. Yet, if you’ve contacted multiple dealers and all have comparable prices on the new car you want to buy, the next issue to resolve is the value of the trade. Do you literally have to lug the car from one dealer to another to see what they’ll offer? That’s what some people do. However, a more likely scenario is accepting a barely tolerable offer at the first dealership just to get the process over and done with. Dealer's count on it happening this way.

Try asking a car salesperson over the telephone or by email what you’re trade is worth. Any salesperson worth their salt won’t give up that figure easily. They are likely to say something like, “If I quote a price too high, you’ll be disappointed when you get the trade value from my used car manager. If I give a price too low, you'll simply walk away and take your business elsewhere. Why don’t we wait until my used car manager sees your car in person and you get the actual trade value coming to you? Will that work for you?”

It sounds reasonable. Yet, if you accept the salesperson’s premise that you need to be at the dealership in order to know what you’re trade is worth, you have just ceded control of the car buying process to the dealer. It’s also my experience as Internet Manager for a major car dealer, that you could easily pay hundreds, if not thousands of dollars more than necessary, all because you didn’t get a figure on your trade upfront.  

Profit Points

The Internet has changed everything when it comes to buying new cars. Customers now arrive at the dealership knowing the exact invoice cost of the very car they want to buy. It puts the consumer in the driver’s seat when negotiating price. That’s why car dealers have had to find other ways to beef up their bottom line on deals where they effectively give the new car away.

One of the areas that dealers make up that lost profit is on trades. They buy them at a low price from the customer in the form of trade value. Then, that same car is run through their shop, detailed, and put out for sale on the used car sales lot. These days, most car dealers make more money on their used car inventory than new.

Even if a car is in questionable condition--dents, scrapes, a history of accidents, torn seats, and fading paint--it can still be sold at a wholesale auction. The same principle applies: buy low, sell high, pocket the difference.

Trade-In

How do you get a car dealer to give an accurate trade value upfront without actually seeing the car? More on that tomorrow.