Don’t Get Taken on Your Trade-in

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Buying a new car is not the way most people end up paying more than they should have. It’s trading in their old car that often ends up costing them the most.trade-lead

Here’s why:

*Multi-tasking –

It’s hard for most people who aren’t finance people to effectively keep track of two complex transactions simultaneously. On the other hand, the guy (or gal) sitting across the desk from you does this dance every day and is a pro at getting you to focus on one thing (the sale price of your new car) in order to distract you from the other thing (what you’re getting in trade for your old car).

Which is why it’s so important for you to focus on just one thing at a time.

Don’t discuss your trade-in before you’ve completely settled the price of the new car.

In writing.

Or, discuss your trade-in first, before you start talking about the new car.multitasking

The purchase price of the new car is one transaction; the trade-in value of your car is another transaction. There is no legitimate reason for the two things to overlap – or for one to be contingent upon the other.

If it is, something’s sketchy.

The typical shuck-and-jive being to make you a “great deal” on the new car… and then make it up on the not-so-great deal they give you on  your trade-in. By which time, incidentally, you are on the hook for the new car  – which makes it very hard to not accept the not-so-great-deal they offer you for your old car. You are probably  exhausted by now and counting on the money from the trade-in to reduce the net cost of the new car you just bought.

But if you haven’t already agreed to buy anything, it’s easy to say “no, thanks!” to a lowball trade-in offer – and continue shopping elsewhere.

*Retail vs. wholesale (and grades in between) –

In order to not get taken on your trade-in, you need to know what the car is worth. As opposed to what the dealer is willing to give you for it.

You have probably heard about “wholesale” and “retail” values. The former is what you can expect to be offered – as lowball as the dealer can get away with. The latter is what you’d pay the dealership next week if you wanted to buy your old car back. The difference between the two ranges from 10-20 percent, but often varies wildly – because (like people) each used car is unique in terms of miles, condition, maintenance history and options. It’s not like shopping new cars – where the only difference between two otherwise identical cars is the price tag.trade-value

Your task is to get the dealer to offer you as much above wholesale (which should be the starting point for your negotiations) and as close to retail as possible. But don’t expect full retail; that would leave the dealer little room to make a buck off resale- and it’s unreasonable to expect him to not make a buck off the transaction. He’s got to cleanup your old car and probably put some money into it for minor fixes, etc. 

Shoot for about 5 percent below retail. If you get close, you did well.

As far as finding out what the wholesale/retail value of your car is: Check resources such as the National Automobile Dealers Association used car value guides (here) and have a look at Auto Trader Online (here) to see what cars like yours (similar age/condition/miles, etc.) are being advertised for. A Saturday afternoon spent rooting around the Net should give you a very good idea of what a fair price would be for your trade-in.  

Of course, the dealer may not want to give you a fair price. But – assuming you’ve followed the first tip above – you’re not under any obligation to buy anything, either. If the salesman realizes that he’s not going to sell you a new car without making you a decent deal on your trade, he’ll probably try to make you a decent deal on your trade.

Which brings me to the most important piece of car-buying (and trading-in) advice I have:

*Don’t have to buy (or trade-in) – 

If buying a new car (or trading in your old one) is optional, it becomes unnecessary to accept a dealer’s hard-sell (or lowball offer). Put another way, the best time to shop – and trade – is when you don’t have to.sale-price

Many people make the mistake of waiting until their old car develops a major problem and they don’t want to put any more money into it. Well, neither will the dealer. Expecting him to give you top dollar for a car that needs a lot of work – or is ready for the crusher – isn’t reasonable. And shopping for a new car because you have to have a new car right now, today – is a guarantee you’ll pay top dollar.

If you don’t plan ahead – and end up shopping when you have to as opposed to when you don’t – there’s still a way to avoid being pressured into a bad deal on a new car or a worse one on your trade-in.

Rent a car.

This will take the time pressure off.

You can get to work, do the things you need a car to be able to do. At most, it’ll cost you a couple hundred bucks. Which is a deal compared with losing thousands on your trade or spending thousands more on your next new car.

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Author of "Automotive Atrocities" and "Road Hogs" (MBI). Currently living amongst the Edentulites in rural SW Virginia.

29 COMMENTS

  1. Good article, one thing I would add, and what I’ve done for years – always deal in “out the door” prices. It simplifies the math to the point they can’t hide from the simple new – used = $. Otherwise there is some fee or other nonsense they “forgot” to tell you about that ends up at the end of the invoice. I don’t care what charges they “can’t” waive. That’s fine and I understand, take it off the price.

    • Last car I bought from a dealer I simply walked in, told them I’d pay $xx price out the door for a specific model with specific equipment, and that was my only offer. The offer wasn’t ridiculous and was researched for a long time, so they accepted and I was done with everything within an hour. Only annoyance was that they made me test drive the car before I signed the contract because it was the law that I couldn’t buy sight unseen, but other than that, no big deal.

  2. If i had a time machine, I’d go back to the old USSR-Yugoslavia and pick up a commie sister wife that looked like Melania Trump
    https://ohfree.net/donald-trumps-wife-melania-trump-leaked-nude-photos.html

    Trump inherited about $120 million from his father in 1999.
    https://www.quora.com/Did-Donald-Trump-inherit-a-lot-of-money-and-then-increase-his-net-worth-at-an-unremarkable-rate

    Join Operation Googuhl And Fight SJW Jigsaw Censorbots
    https://ageofshitlords.com/wp-content/uploads/2016/09/operation-google-3.jpg

    • Hi Tor,

      Noxious, eh? Being told you must leave your home? By your “parent,” the state? Feed them fish heads! It may be foolish to remain in situ, but a free adult human being has every right to be “foolish” (as others may see it) with their own life, their own home.

        • Flew in from Miami Beach BOAC, didn’t get to bed last night. All the way the paperback was on my knew, man I had a dreadful flight. Back in the USSR, you don’t know how lucky you are boy, back in the USSR.

          Well, that was another world ago.

        • Hi AJ,

          It’s of a piece. “Safety” at home = we tell you what to do; better obey (or else).

          Same dynamic operates at the foreign policy level. They – our rulers – can’t abide anyone not doing as they order. They control us, here – but the foreigners (and the foreigners’ leaders) are not under their control. This irritates them.

  3. Good advice about negotiating one side first. I like the idea of doing the trade-in price first.

    Can’t expect a dealer to give away the farm on both sides. So depending on how generous or low ball he is on the trade in, that’s the way he can expect me to negotiate on the new car price.

    When I go to buy, I’m more focused on getting exactly the model, color and options I want than getting the absolute lowest price. Also want to drive that very car before I buy. And like to see as few miles on the odometer as possible. “Just driven off the truck” is my preference.

    In the Phoenix area, Honda dealers seem to be the greediest. When I wanted to buy an Accord, two separate dealers were so unreasonable that I went down the street and bought an Acura TL for surprisingly little more.

    • My cousin that lives in Ca. came home to Texas is 77 or 78 and bought a new RX7 for $6700, a much better deal than he could get in Ca. He drove it for 6 years and traded it on an S 2000 Honda. They did the Honda deal and then the dealer asked if he wasn’t going to trade the RX7. My cousin told him he decided to keep it. He advertised it in the classifieds and sold it for……$6700. I guess he felt he’d subsidized dealers enough when he traded his ‘Vette on the little cheap Porsche WTF ever it was….I forget. They were very forgettable.

        • Or the 924 with the 1.7? VW water cooled straight 4 motor. Great little car actually, I would take a 924 over a 944 (genuine Porsche motor) any day. Neighbor had a 3.0 944, and it was a total piece of junk.

          • I agree, AJ –

            It’s a sports car – not a muscle car. Power isn’t everything. The original Miata was not very quick (IIRC, took about 8 seconds to get to 60, so a V6 Accord or Camry would smoke it in a straight line) but which was more fun to drive?

          • Hi AJ,

            I agree!

            There are sports cars… which are not muscle cars. A sports car is not defined by its quickness – and doesn’t even need to be quick at all. The original Miata, for example. IIRC, it took about 8 seconds to get to 60, about the same as a four cylinder Camry.

            But which is more fun to drive?

            • Re: Fun, I find it ‘funny’ how boring all the fast cars have become. i.e Last week while I was getting the transmission fluid done on my old MINI, a guy pulled up in his AMG S63 (5-600 something horsepower). Twin turbo, super gorgeous black on black, worth at least 12 times my car, triple the horsepower, 0-60 in 4 seconds…but guess who’s car we talked about for the next hour?

              🙂

    • Hi Mike,

      Thanks!

      I’ve had similar experiences helping friends/family buy cars. Some salespeople/dealers are super nice and (more important) entirely reasonable – provided you are as well. The latter is key. I respect the other guy’s right to earn a living and don’t expect anyone to work for freeeeeeeeeeee.

      I also tend to tip at restaurants. 🙂

      • eric, it’s easy to tell the people who have worked for their daily bread when eating out or at a bar. They spread their money around, don’t expect people working there to do it for nothing. Even before getting married I’d have friends who worked in restaurants, bars, etc. I’ve given foot rubs(and much more on the comely women)even after a day of my own bust-ass. I’ve had some extremely tough jobs but I never thought of any of them as being tougher than waiting tables, the work of saints in my book.

        A good waiter is good because they do a good job and should be rewarded. In my case, I over-tip, if there is such a thing. My grandparents ran cafe’s and restaurants and never had any extra and it was all tough work. I’ve lived with a couple women who did that sort of work and knew they were just as tired if not more than myself at the end of the day. In my view, over-tipping is just a fallacy.

  4. Another thing about renting a car when car shopping. You can rent what you’re considering buying. You can get to know a vehicle much better driving one for a week or two instead of a 45 minute test drive.

  5. I’ll never forget when dad traded in the 73 Dart that he inherited from grandma. The mechanic couldn’t get it to start when moving it from the parking lot to the bay. The salesman was laughing when he sat down with dad.

  6. I don’t negotiate with car dealers. Do my homework – thoroughly – and know exactly the fair price for the new vehicle, and exactly what I want for my trade. My prices are very aggressive too. They can take it or leave it, and if they’re not interested, I walk and go to the competition. Between the wife and I, have purchased about a dozen cars in the last 20 years and never failed to get the deal I want. Another thought, and I know some may disagree, but sell your old car separately at Car Max. I’ve never bought from them but I did sell a couple of cars to them. There’s no negotiating and they won’t give you the absolute best price, but their offers are surprisingly reasonable. Quick, easy, no BS and you’re in & out with check in hand in about an hour.

      • The fascist people’s republic of California made this decision easy – trade in or not, we have to pay sales tax on the full value of the car, even if you trade in. Bonus points for paying the full sales tax for the full price of a car when you lease it too. Bastards….

  7. This is good advice for sure, however I want to play devil’s advocate for moment, having been involved in the “evil” side of the car industry before…sales.

    95% of the customers I saw and talked to, including friends and family, completely over value their trade and are so sure the dealer is out to screw them (true in many cases) that even a reasonable salesman can’t get through to them when trying to tell them an orange Cobalt 2 door stripper with 220k miles isn’t worth the $1,500 we wouldn’t offer them.

    That having been said, I usually just told customers “You probably don’t want to trade your car in, you’ll want more than we’ll give you.”

  8. Many people make the mistake of waiting until their old car develops a major problem and they don’t want to put any more money into it.

    I worked at a high end European dealership when I was in high school and college, so I’ve seen both sides of this game. It was always surprising to young me how people would lie about their trades and try to cover up serious problems – to experienced professionals with seasoned mechanics at their disposal!

    Anyway, the only meaningful number is the trade differential, which is easily determined and easy to compare on new cars (almost impossible on used – since, as you note, they are all different). Another factor is sales tax. Here in the Peoples’ Republic of MN, we pay (huge) tax only on that differential, so depending on the value of the trade, it can actually be more beneficial to trade it than try to sell it outright.

    Either way, unless you’ve done it many times, it can be kind of intimidating. I will say that it’s way easier today than it was 30 years ago. Remember the monthly NADA books and the stupid line item addition/deductions? The interwebs are a beautiful thing!

    Your advice to chill, take your time and employ a methodical process is spot-on – except for the fact that the vast majority of people buy on emotion and impulse. Sad to say, I’ve done it myself 🙂

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