How To Approach The Trade-In Process For Your Used Car

The question that most car owners face today is whether to trade in their used car or sell it privately.

To be sure, there are advantages and disadvantages to both, but right up front, here is the truth: You are bound to get more for your used car if you sell it privately than trade it in a dealership.

There are notable exceptions, of course. For instance, if your car is on a lease, then trading it back may be more advantageous for you than to sell it by yourself and be constrained to lower the price to answer for the existing lease.

The single biggest factor that affects your choice between a private sale and a trade-in is the marketability of your car. And that’s a question we are going to answer first.


How’s the Market for Your Car?

In real estate, the easiest homes to sell are that are pretty much the same as all other homes in the neighborhood.

If your home is in any way different – that is, it has been custom-built or improved and remodeled to the point of making it the most expensive house in the block – then your real estate agent will have a heck of a time unloading it on a willing buyer.

Houses with strange interior decors, oddball features, off-beat designs, and weird gardens are always the difficult ones to sell. The reason is simple: an unusual house requires an unusual buyer.

The same is true for cars. In the car industry, the fast sellers are the “normal” four-door cars. Toyota Camrys, Honda Accords, and others like them are among those that pose no trouble for you should you decide to sell privately or trade it in for a new one.

The key is to sell the market what it wants. And what the market wants is a “normal” car without silly improvements like fancy wheels, paint stripes, racy spoilers, window tinting, boom-box stereo, etc.

Therefore, whether you want to go to a dealership or sell your car yourself, you stand a much better chance if you have a nice, clean, normal car.


The Trade Advantage

There is only one important advantage for trading in your used car than selling it yourself – that is, it is the easiest to cope.

It is convenience itself when you do not have to hassle yourself with selling your used car. Let the dealer deal with the difficulties of selling a used car. After all, they make it their profession and their business to sell cars like yours.

You, on the other hand, probably know next to nothing about selling a car. So if you want to make things easier for you, then by all means, trade it in.

Even dealers of used cars are interested in your trade-in. Because of that, they want to make the procedure as easy for you as possible. This is the main draw of trade-ins and the main reason why many people prefer this method of selling a used car to a private sale.

As a same-day transaction, trading in your car requires only the most minimal fuss and bother. Generally, this is what happens:

* The dealer assesses your car.

In assessing your car, the dealer will be checking its condition, age, and other factors, which directly or indirectly affect its trade-in value.

He may even take the car for a mile-drive or so and check its paint for body damage. And if you are in the Southeastern states, then he may generally use the Black Book as a guide.

Most dealers have enough experience to have a rough estimate of a car’s worth just by looking at it.

* You bargain with the dealer for the trade-in value of your car.

Typically, what happens is that, after the assessment of your car’s condition, the dealer will quote a value. If it is too low in your opinion, you can haggle for something higher until you and the dealer strike a bargain.

* Whatever the result of the bargain, deduct that amount from the amount you have to pay for your new vehicle.

Of course, the trade-in value of your car is always lower than the amount you could have sold the car in a private sale. However, the trade-in process compensates for this by giving you a way out of significant pitfalls that attend a private party sale of your car.

And what are these pitfalls? Oh, the usual kind.

Selling your car yourself is time-consuming. By trading it in instead you can save significant time.

Selling your car yourself means that you will have to spend energy getting the car cleaned up, getting the word out, and negotiating with the buyer. By trading it in instead you can save some effort.

Selling your car yourself does not end with just selling the car. There are still lots of post-sale headaches to take care of before you can relax and call it quits. By trading it in instead you leave all that to your dealer.

Moreover, as one spokeswoman for the National Automobile Dealers Association, Donna Reichle, said, selling your car yourself means that you are basically making yourself available to the buyer. By trading it in instead you absolve yourself of liability.

As mentioned, the ultimate advantage of trading in is convenience.

Advertisements? Test drive arrangements? Legal battles in case the car breaks down after a recent sale? All these potential consequences of a private sale can be avoided by letting the dealer deal with your used car, thus making it his responsibility to prepare and handle its resale.

Now, in exchange for all these efforts and responsibilities the dealer is justified in setting a suggested trade-in value that is lower than the retail value of the vehicle. The difference covers the cost of refurbishing, detailing, marketing, and, of course, dealer profit.

Finally, trading in your used car may also offer a tax advantage. This is especially true if you are buying your vehicle at the same time. Sales tax is taken from the difference in cost between the price of the new car and the trade-in value of the used car.

You can take advantage of this tax benefit if you live in a state where the sales taxes are high.


Trading in Your Used Car

Now that you know the advantages and disadvantages of a trade-in, it is time for you to learn how to approach the process.

There is no single right approach to a transaction. When you trade in your used car in a dealership, you do not simply look at it from the perspective of a consumer. You also have to look at it from the view of the dealer’s desk.

Having only a single view of the trade-in process – that is, looking at it merely as a consumer and not making any attempts to put yourself in the dealer’s shoes – is a misconception that could very well result in a failed transaction.


Tip #1: The Dealer’s Profit

Dealers are at an advantage because they are in the perfect position to know about used cars and how to market them.

If you learn to look at the transaction from the eyes of a dealer, you begin to learn more about how better to approach the trade-in process and at the same time eliminate any preconceived notions you might have as a consumer.

For example, according to most dealers, the biggest misconception that people have about trading in is the amount of money that a dealer makes – that is, the so-called dealer’s profit.

If you have been doing your research, you might have learned from a trade-in guide somewhere that the dealer necessarily has to offer a low amount as your car’s trade-in value in order to profit from the difference in the retail price.

However, in truth, the gross profit that a dealer makes per unit ranges from $1,200 to $1,800.


Tip #2: Book Value

This is a very common misconception that consumers have. While it is understandable why you would base your asking price on the book value of your car, first you must understand that this is merely an opinion.

There are a lot of factors that can affect the value of your used car, such as its condition, any damages and to what extent, etc.

Just because the book says that your car is worth that much does not mean that the dealer will automatically give you that value. Of course, if your car is really worth that much, then you have a right to demand that amount from the dealer.

However, if based on certain factors your car is not worth the value stated in the book, then you cannot expect the dealer to give you more than its worth.


Tip #3: Trade-In Value

The trade-in value of your car is different from its book value. The two may be related closely but in general, trade-in value is usually lesser or lower than the book value of a car. That is because with trade-in value, you have to take into account the costs of refurbishing, car detailing, and dealer’s profit.

The difference between all these costs of “resale” (as they are called) and the book value of your car equals its trade-in value.

Now, you can always research the Internet to get an idea of what your car is worth if you trade it in. But again, like book values, trade-in values are merely opinions. Don’t take them as the final word on the matter.

Understand that there are a number of things that can affect your car’s trade-in value, particularly from the dealer’s point of view. Things such as what day of the month it is, the inventory mix, and the product mix on the lot make the difference between a high trade-in value and a low one.

So your car may be worth what it says on the Internet. But remember that some of the projected figures you find on these websites that offer trade-in value quotes are made under ideal situations.

Thus, when there are adverse conditions, such as, for example, the dealer has five or six white Camrys on the lot and you are trading in another white Camry, you cannot expect the same figures, given the situation.


Tip #4: Emotional Value

Lastly, some consumers attach too much emotional value on their cars. They believe that their cars are the best brought into the dealer’s lot so far. In some cases, that might be true. But there is still a limit to how much a car is worth.



To recap, trading in is the easiest, most convenient option you have to get rid of your used car. This is especially true if you are aiming to buy a new one. Most states only charge you sales tax on the difference between the trade-in value of your used car and the retail value of your new vehicle.

But to get the most value of your trade in, it is important to look at the whole process not just from the perspective of the consumer but also of the buyer. In doing this, you acquire a more realistic grasp of the trade-in process and thus be able to better approach the transaction.