How Dealers Price Used Car Trade-Ins?

The idea of trading something in for something else has been the basic part of civilization. So the fact that it is possible to trade your old car to the dealership for something newer is not that much of a phenomenon. Car dealers are open to taking in a new or used car from a car owner and then adjusting the price of a new car. But the question arises: “How do the dealers price the used car trade-ins?”

The concept of trading in a car has always been accepted by a portion of consumers. But still, this is not universally practiced. Trading a car is much like selling your used car. But the main difference is that you have to perform an exchange here. Do you want a new car? Just change your car into a new one from the dealership. They will measure the value of your car and calculate the cut-off from the new car price.

What is a Trade-In?

If we explain with the definition, trade-in is the exchange of one item for another. When you go to a car dealership to trade in your old car, you can come home with a new car with no problem! All you need to do is perform a ‘car trade-in’ where you buy the new vehicle with the combined value of your old car and some money.

Car trade-in is a very popular way of buying a new car. Car owners often look towards getting rid of their old cars when they think of buying a new vehicle. Whether you want to buy a new or used vehicle, you can easily include your old car as a part of the payment for the new car. After the worth of the exchanged car is calculated, the new car price will be reduced by that amount and can be paid as a car loan.

How to Trade-In Your Car?

The idea of trading in a used car is very simple. You just take your car to the dealer, they check the car and quote a price, and then you leave it and buy a new car. But even though the idea is simple, there are a lot of smaller intricacies involved. Just like selling a car, there is an issue of getting a good deal and improving the value of the car through proper treatments.

Find Out the Car’s Trade-In Value

Dealers often provide auto loans after the value of the returned car is deducted. So it is very important to get a good exchange deal. For that, make sure to do your research to find out the actual worth of the car. Car dealerships use various platforms to calculate the wholesale price. You can also check the prices online through websites like Kelley Blue Book, Edmunds, Zippy Cash for Cars, etc.

Arrange All the Documents

Make sure that all the necessary documents for your car are in order. The documents that are must-haves if you want to trade in your car are:

• Car title
• Vehicle History Reports
• Maintenance information
• Loan details
• Car registration

Clean Up the Car

Even though making minor repairs to the car does not actually affect the value of the car. Still, there are some things you can do to increase the positive equity values and also reduce the negative equity issues. Such as, you can clean the interiors, make the car shine from the outside, and also buff the scratches.

Shop Around for a Better Deal

Do not just visit our shop and make the deal right away. Make sure to check what prices other dealers are going to offer for the car. Sometimes, choosing a different brand dealer is a good choice, as a dealership where your car brand is not available will probably want to give you more money for the car than a shop where there are plenty of cars of the same brand.

Negotiate the Price Separate from the New Car Price

Some people make a mistake by trying to buy a new car as the main purpose of the transaction. But both the old car price and the new car deals are important. Try to have a completely different discussion of negotiations for each transaction. That way, the salespeople will not be able to influence the deal that much.

How Do Dealers Determine the Trade-In Price for Cars?

In 2019, according to Edmunds’ report, 40% of car transactions were based on car trade-ins. Dealers always want to acquire cars at low cost to be sold again at a high profit. But the value of the exchanged cars is measured according to some specific calculations depending on various elements of the car.

Consult With Blue Book or Black Book

To find out the wholesale price of the cars coming in for being traded, dealers look at the prices stated by platforms such as Black Book and Blue Book. KBB can calculate the possible worth of the vehicle after you input the basic info about the ca.

Appraise the Car

When you take the car to the dealership to exchange it for a new one, the dealers will call on a professional to check the car. You will have to mention the condition of the car, such as its year, major problems, minor details, etc. But still, they will get the car appraised by their own mechanic. In this situation, it is better to not hide any information about the car, as any omitted issue can drive down the price.

Check the Documents

The dealership will check all the needed documents before confirming the deal. That’s why these must be in order. In a lot of states in the United States, it is illegal to do any transaction with a car without a title. Having a title and license will only increase the chances of a better offer.

Check for Any Debts on the Car

If you want to trade a car for which you still owe money to a debtor, it must be mentioned to the dealer. If the used vehicle still has some of the auto loan unpaid, the car can still be traded. Though in that case, the amount will be paid by the dealer; thus, the said amount will be deducted from the calculated value of the car.

Pros and Cons of Trading-In Your Car

The main problem with trading cars can be the fact that not a lot of people know the intricacies of trading vehicles with dealers. And another reason people do not trade in cors is that there are some shortcomings to this practice. The pros and cons both need to be known by the e potential customers.

Pros

• Any mechanical issues of the car can be repaired by the dealership at a much lower cost than you could ever do. You do not have to hunt to and fro for different body parts.
• After the price is set, the rest of the process is done absolutely hassle-free, and you do not have to do anything.
• When you try to buy a new car in exchange for an old one, you can seal the deal without any down payment with the trade-in offer. The submission of the old car will work as an initial payment.
• The dealers take care of all the documents and also pay sales tax in certain cases.

Cons

• You can only buy the car you want if the dealer agrees to pay the desired price for your older car. Otherwise, the price adjustments might not match, and you might end up having to choose a different car.
• There is no guarantee that you will get your car back if the new car deal does not work out for some reason. The dealer has the right to sell your car to someone else by then.
• The dealers have a certain autonomy here, so the money is not as much as the amount you might get somewhere else. Sometimes, selling the car outside of a trade-in may make you more profit.

Conclusion

If you think about it, it is obvious that trading your old car in for a new one is much easier than looking around everywhere trying to find a good deal while selling the car. Even though car trade-ins have some disadvantages, the advantages trump the overall situation. With the rising inventory rise of new cars after the last two years, 2023 will see heightened demand for new cars.

As more and more people get comfortable with the new models coming out, the used car market will get a moment to breathe. This will bring balance in both used and new car markets. Dealers are always looking to increase their profit by trying to pay as less as possible. So it is up to the customers to follow proper strategic endeavors to get the best deal while trading their cars in for a different and newer model.