How Car Dealers Determine
Used Car Trade In Value
When most people think about getting rid of a used car in favor of buying a newer model, one of the first things they wonder about is trade in value. Trading in a used car allows you to lower the actual purchase price of your next car and who doesn't love saving money?
The easiest way to get cash for your car is to sell it to a dealer instead of trying to privately sell the car on your own. The advantage of this method is that you can walk away with money in your pockets today and the dealer will usually handle all of the DMV paperwork for you.
Trade In Value Of A Used Car
This article will explain the basics of how car dealerships determine the value of a trade-in. It's based on my personal experience working in several car dealerships, however cannot be guaranteed to be the end all answer to this question.
Read MoreThis article will explain the basics of how car dealerships determine the value of a trade-in. It's based on my personal experience working in several car dealerships, however cannot be guaranteed to be the end all answer to this question.
In 99% of car dealerships:
The following factors are used to determine the ACV of a trade in. ACV stands for Actual Cash Value.
- Vehicle Mileage
- Interior Condition
- Exterior Condition
- Tire Wear
- Cost of Reconditioning or "Recon" for Sale at Auction or On the Lot
Dealers used what is called the "Black Book", which is a weekly publication that gives dealers averages of what vehicle makes and models are currently selling for at auction. Kelly Blue Book is RARELY ever used because it always shows a higher value. NADA (National Auto Dealer Association) car value guides are used in some dealerships.
99% of dealerships across the nation, the Black Book is used and is not a publication that is sold to the public. Values are based on "Clean Book", "Average Book" and "Rough Book"... dealers use these as a guide when estimating ACV for a vehicle.
Excess mileage "deducts" are subtracted from the value. Also, dealerships rarely ever add anything to the wholesale value of a vehicle for additional options, such as Aluminum wheels, luggage racks, CD players and so forth. Although consumers would like to think that the extra add-ons that they purchased will positively impact trade-in ACV, it rarely does.
Trade In Allowance
Once the dealer has determined the ACV or Actual Cash Value of the vehicle, they then take that number and determine how much of it they will actually allow you. Sometimes, a dealer may "holdback on your trade" and offer you less for it than it is actually worth. The difference becomes profit that is credited to the new car department as it is the used car department that actually "buys" the trade-in to be resold.
Negotiating the amount that the dealer is allowing you for your trade-in can make a big difference. In many cases, a dealer will "holdback on your trade-in" one to two thousand dollars or more.
Note: It is important that you not reveal to the dealer what you owe on your trade-in before they give you a figure as to what they are going to value it at. Sometimes, if you have equity in your trade, the dealer will not be as "generous" when figuring the ACV.