How Does A Vehicle Trade In Work?
You want a new car. Also, you want to get money for your current car. The easiest way to do that is in one transaction—an automobile trade in at a dealership. But how do you do it? What do you need to prepare? How much should you expect to get and what about your old loan? In short, how does a vehicle trade in work?
Automobile dealerships that sell new cars also sell old cars. In fact, they make a better profit from cleaning up, refurbishing, and selling used cars than they do from selling new cars. So, they’re always happy to offer you a shiny new car in exchange for money and your old car. They are going to do everything in their power to sell you the new car for the highest amount they can and pay the least amount for your old car. You are working to pay the least for the new car and get the most for your old car. You really need to be prepared and armed to advocate for yourself.
Research Your Automobile
When you find a car that you want, one of the questions the dealer will ask you is whether you have an automobile to trade in. Experts warn that you should not have that conversation while negotiating for the new car. First get the deal you want for the new car by researching the car’s value on sites like National Auto Dealers and Edmunds. These will tell you the automobiles’ book value—a beginning price from which to begin to negotiate. The actual price may differ depending on condition, extras, and what market is like in your area.
Then, once that agreement is made, discuss your old car separately. Use those same sources to research your automobile to figure out how much is reasonable for you to expect to get for your trade in before having the conversation with the dealer. Be honest about past damage and other issues.
Whatever amount the dealer agrees to pay for your old car, they don’t pay it to you in the form of cash; they deduct it from the price of the new car. That’s why it’s important to make separate negotiations—that keeps the transaction clean and avoids any financial sleight-of-hand that might cost you money.
For example, some common tactics are to slide the numbers up and down on the trade and the new car in the interest of “making the best deal for you,” but it actually benefits the dealership. It may be confusing when you are negotiating if you hear, “Well your car is worth $5,000, and this new car is worth $30,000 but how about I come down three thousand on the new car and give you $2,000 for your car?” At that moment, when you’re making a very big purchase, and you are feeling a lot of pressure, that math might sound right. However, it could be that:
- The $30,000 car sells for $27,000 elsewhere, and you could have negotiated down to that price in the first place.
- Your trade is worth $5,000, and that’s the least you should take for it.
- You should be driving away in a new car with a $22,000 loan