Why is My Car’s Trade-In Value So Low?

March 14 2019, Kelowna Nissan

Why is My Car’s Trade-In Value So Low?

My Car is Worth How Much?

Most people have a love/hate relationship with car dealers. One of the things that bugs them the most when they’re shopping for a car is the amount of money dealerships will give them for their trade-in. Thanks to the internet, with very little homework, people can go into a dealership armed with a pretty good idea of what the retail value of their vehicle is. When the money discussions start, people are often shocked and sometimes downright angry when they find out how much the dealership will give them for their trade. Some people get so angry they storm out of the dealership, vowing never to return. If you’ve ever been in the position where the trade-in value of your vehicle was at odds with what you thought it was worth, here are some things to consider.

Wholesale is not the Same as Retail

Car dealers are obviously in the business of making money. If they weren’t, they wouldn’t stay in business for very long. When you look up the value of your vehicle on sites like Edmunds.com or Kelley Blue Book, what you’re seeing is the retail value. That’s the price that you could reasonably expect to get if you sold the vehicle yourself. When you trade a vehicle in at a dealership, they will give you wholesale value. They have to do that so when they sell the vehicle, they can make some money off of it. In fact, dealerships can often make more money off of the sale of your trade than they do on the sale of a new vehicle.

Taking a Trade-In is Risky

You also have to consider the risk that a dealership takes whenever they take a vehicle in on trade. Even if a vehicle looks like it’s in good condition, it could require hundreds or even thousands of dollars worth of repairs in order to put it into sellable condition. No reputable dealer worth their salt is going to knowingly sell a vehicle that has mechanical defects. When you are negotiating the purchase of your vehicle, the dealer will take a quick look at your trade and come up with a trade-in value. Until it’s up on the hoist and a technician can take a close look at it, they have no idea how much your trade will actually cost them. If a vehicle requires expensive repairs, those costs need to be tacked onto the selling price of the car if possible. Sometimes that isn’t realistic and the dealership loses money.

Another thing that a lot of people don’t realize is even though a dealership takes a vehicle in on trade, that doesn’t mean they will sell it on their lot. If you trade in a 2000 Pontiac Montana with 200,000 miles on the odometer, the dealer probably won’t put it on their lot next to a $50,000 luxury vehicle. Unless you are trading in a newer vehicle in excellent condition, the dealer will probably sell it to a wholesaler who will in turn sell it on their own lot for a profit. If even the wholesalers won’t touch it, your car will be sent off to an auction for whatever someone is willing to pay for it. A $2000 vehicle could easily end up selling for $1000 or less at an auction. Finally, even though you love your old car and there are some great memories associated with it, the dealer could end up selling it to an auto recycler for around $100.

How Trading-In Benefits You

Whether you agree with the trade in value of your vehicle or not, trading it in can be a real advantage to you. Selling a car can be a real pain. First of all, there are the phone calls at all hours of the day and night. Then you have to deal with the lookie-loos who come out and give you a ridiculously low ball offer in the hopes that you’re so fed up with trying to sell your car that you’ll take anything. Or, they nitpick about every little thing to try to drive the price down. A lot of callers probably won’t show up at all so you waste an entire day waiting for them. You also might have to deal with an irate buyer who demands a refund when the transmission on the vehicle fails after they’ve driven it for a month.

The tax advantages of trading a vehicle also have to be taken into consideration. Depending on where you live, trading in a vehicle reduces the amount of tax you have to pay on your new vehicle. You only pay taxes on the difference between the trade-in value of your car and the purchase price of the vehicle you buy. So, if your car is worth $12,000 and you buy a $20,000 vehicle, you only have to pay taxes on $8,000. That can save you quite a bit of money.

Shop Around for the Best Trade-In Value

There’s no doubt that you can probably get more for your vehicle if you sell it privately rather than trading it in. However, only you can decide if the time, effort, and risks involved in doing the work yourself are worth it. If you are considering a vehicle purchase, it doesn’t hurt to shop around to find out where you can get the best value for your trade.

Kelowna Nissan makes it easy for you to get a good idea of what they’ll give you for your trade with their online trade appraisal tool.


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