Your Car'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 car you're buying, and then artificially inflating the trade-in allowance an equal amount.

In reality, all they are going to give you is wholesale value for your vehicle. Why should they buy your trade-in for more money then they can buy a similar vehicle from a car dealer auction that sells at wholesale value? A car dealer is no different than any other merchant in that they have to buy inventory to resell. Just like the grocery store or the furniture store owner, they have to buy at wholesale and sell at retail in order to make a profit and stay in business.

The problem is that I've never met a customer who was satisfied with wholesale value for their trade-in. They always think their vehicle is worth retail value. It doesn't help when Blue Book and other reputable automotive resource web sites list unrealistic trade-in values for most vehicles.

The only way to get more than wholesale value for your car is to sell it privately.

Car dealers even have terminology to differentiate between the true amount they are putting in a vehicle, "ACV" or "Actual Cash Value," and the artificially inflated number that they list on your car sales contract, "Over Allowance."

They use these two terms so that when they are discussing the deal between management and salesman, and when they are calculating their profit after a deal is complete they can differentiate between the true number for the trade-in and the false, inflated number.

The car dealer wants the car deal to follow the path of least resistance, so they tell you what you want to hear. It's all "Smoke and Mirrors!"

So how can you know for sure what the car dealer is actually giving you for your trade-in?

Always negotiate the selling price of the car you're buying without the trade-in. Bring the trade-in into the deal after you have agreed on a purchase price. By doing this you take away their ability to artificially inflate the price of the vehicle you're buying and therefore, they can't artificially inflate the trade-in allowance either. They'll have no choice but to tell you the true ACV (Actual Cash Value) of your trade-in.

The car sales person won't like you dealing in this manner, but so what. No one says you have to do a car deal their way. Their way will usually cost you more money anyway!

Remember, If you tell the car dealer 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" (the difference between the vehicle you're buying and the trade-in allowance) will be the same in both scenarios, but the inflated scenario always looks better on paper to the customer even though it's all BS!

In all fairness, doing a car deal in this convoluted fashion is not all the car dealer's fault. As I mentioned earlier, most customers have an exaggerated opinion of what their trade-in is worth, so in order to not anger the customer and risk losing them, the car dealer will show them on paper what they want to see . . . a high trade-in allowance, even though there is absolutely no way the car dealer could, or would ever pay that amount for the trade-in.