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Your Vehicle's Trade-in Value: The Real Truth!

Car dealers have a bad habit of telling you they're giving you more for your trade-in than they actually are. They do this by artificially inflating the price of the vehicle you're purchasing, then artificially inflating the trade-in allowance to make you think you're getting a tremendous amount for your car.

In reality, all they are going to give you is wholesale value. Just ask yourself this: Why should they buy a car from a customer for more money than they can buy a similar car for at a dealer auction? A car dealer is no different than any other merchant in that they have to buy inventory to resell. Just like the grocery store owner, they have to buy at wholesale and sell at retail in order to make a profit. If they can't make a decent profit they're out of business.

The problem is that I've never met a customer who is satisfied with wholesale value for their trade-in. Everybody thinks their car is worth way more than it really is! It doesn't help when Blue Book and others list unrealistic values for most vehicles. The only way to get more than wholesale value is to sell the vehicle privately.

Car dealers even have terms to differentiate between the real amount they are putting in a trade (ACV) and the fake number that they list on your sales order (Over Allowance). ACV stands for "Actual Cash Value." They have these two terms so that when they are discussing the deal between management and salesperson, and when they are calculating their profit after a deal is complete they can differentiate between the real number for the trade and the false, inflated one!

So what happens when you trade a vehicle to a car dealer is that they'll inflate the selling price of the vehicle you're buying and then artificially inflate the trade-in allowance so you think you're getting a high trade allowance. It's all "Smoke and Mirrors!"

If you're buying a used vehicle they will have the price jacked up high enough over their cost to allow them to show you an artificially inflated trade-in allowance and still make a decent profit. In the case of a new vehicle they will start with the sticker price, and even add the rebate if any into the pot to give them some extra room to over inflate the trade-in allowance.

If you're buying a new vehicle always tell them to put the rebate aside until after the deal is agreed upon. Then, and only then do you subtract the rebate. Otherwise you risk losing the rebate in a jumbled up mess of numbers!

This is why I recommend on this website to always negotiate the selling price without the trade-in. Spring the trade-in on them after you have agreed to a price on the vehicle you're buying. This is the only way you can know for sure how much they are actually giving you for your trade. The car sales person won't like it, but so what. No one says you have to do a car deal their way. Their way will usually cost you more money!

If you tell them up front that you have a trade-in they will always hold back some money in the selling price so they can show you - on paper - an inflated trade-in allowance. The "price difference" will be the same in both scenarios, but the latter always looks better on paper to the customer even though it's all BS!

Doing car deals in this convoluted way is not all the car dealer's fault. As I mentioned earlier, most customers have an inflated opinion of what their trade-in is worth, so in order not to make the customer mad the dealer will show them on paper what they want to see . . . a high trade-in allowance, even though there is absolutely no way a car dealer could or would pay that amount for the trade.

What a Crazy System!

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