If you're wondering “why are trade values so low?” This is because dealership are very good at negotiation and can profit from your trade in value. Also, dealerships need to recondition the vehicle and spend some money getting it ready for the next customer. If you're not comfortable getting underpaid for your old car, you can always sell it to Cash Cars Buyer and receive the top dollars your vehicle can make around your area!
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When shopping for a new vehicle, one of the biggest challenges one might face is understanding the trade in value. In most scenarios, when you trade in your old car to use its value towards the new vehicle, you will most likely be underpaid.
When trading your car, you could do it through a person-to-person or a dealership. If you've done it through a dealership, that's when the low value comes in because most dealerships try to make money out of your old car along with other important reasons.
Understanding the reasons behind why our trade-in value is so low can be a little challenging but not impossible.
This article provides it with all details you need to know about the trade in value and how it's calculated, and the different factors involved in calculating the trade value. Finally, once you understand these factors, you can know why our trade in value is so low.
What is the trade in value?
Before we dive into the details about why our trade in value so low, let's step back and make sure that we're all on the same page regarding the definition of the trade in value.
The trade in value basically means the value your old car is worth, which will go directly towards your new vehicle as a down payment. In other words, the trade in value is the amount of money the dealership is willing to pay you and use it as part of the down payment for the new vehicle.
The trade in value differs significantly from a dealership to another and even if you used online tools, you would still get a range for the trade in value.
For example, if you used the AutoTrader online tool, you won't get the same exact values for your trade in vehicle as those available in Kelley Blue Book instant cash offer. However, it's always worth spending the time and effort to understand the expected range for the trade in value before going to the dealership and conversing with the salesperson.
Salespeople at the dealership are very good at negotiation, and they can easily make a good amount of money out of your trading car if you don't have the best knowledge. That's why having a number in the back of your head will help you understand whether you're getting a good deal or a bad deal.
Obviously, you will never get any number even close to what Kelley Blue Book will tell you. But you can have the number provided by Kelley Blue Book for Auto Trader as a means to argue with the salesperson about the reasons behind your asked price. Once they feel that you did some research, they will step back and allow some room for negotiation.
Why are trade in values so low?
As we mentioned before, the trade in value will always be low, and it's much lower than what Kelley Blue Book or Auto Trader would tell you. It might be towards the lower end of expected values for your trading vehicle.
It's not surprising to hear that the trade in values is so low this is because calculating the trade in value involves the following factors:
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Are you trading in with the dealership or with a person?
As we stated before, having conversation with a dealership salesperson can be challenging because they are very good at negotiation and can convince you that the low trade in value is what your vehicle really worth.
However, when you trade it or sell your car to a private buyer, you will not accept the deal unless you're happy with the price, and the private buyer will not come unless he's willing to pay a close number to what you asked for.
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Did you consider reconditioning prices?
When the dealership trades in your car, they won't immediately sell it to the next customer. They will have to spend some time and effort working on the vehicle and recondition it. In other words, they might need to fix some minor issues and replace missing components like the mirrors or broken lights. In some cases, dealerships need to do heavy maintenance repairs by removing and installing new major components depending on the status of your vehicle.
The dealership considers their team's time and effort to get your vehicle ready for the next customer. Keep in mind that the hourly rate for dealership workers is much higher than those at an independent shop or professional mechanics outside the dealership.
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Did you know that you pay taxes on the difference value only?
If you don't already know, most states do not charge you taxes on the trade in value. What they do is that they charge taxes on the difference between the new car's value and the trade in value.
For example, if your trading car is worth $7000 and you're planning to purchase a vehicle worth $10,000, you will only pay taxes for the difference, which is $3000.
With this in mind, most customers see taxes as an incentive to encourage them to trade in their cars even though the trade in value is pretty low.
Can you negotiate trade in value?
Of course! You're always encouraged to negotiate. You're given trade in value. Keep in mind that dealerships will always propose a very low value and allow some room for negotiation if you're not happy with the offer.
When negotiating the price with the dealership, you have to have some basics in the back of your head. That's why we recommend you do some research and some due diligence before getting to the dealership. For example, you can review what Kelley Blue Book and Autotrader suggest as the minimum-maximum values for your trading car.
Once you have these values, you can confidently talk to the dealership and indicate that this is the range my vehicle can make, and it doesn't make sense to go significantly below that.
Keep in mind that if money is your top priority when selling your old car, there are plenty of other alternatives that you might try, like Cash Cars Buyer, for instance.
How do I increase my trade in value?
Increasing your vehicle's trade in value does not happen the same day you're planning to visit the dealership. It starts back when you maintain the vehicle.
It's recommended that you never skipped regular maintenance like tire rotations and oil change to prevent major damages from happening to your vehicle.
The whole thing when it comes to trading values is about how many problems your vehicle has. If your vehicle is in good condition, you will most likely get a higher offer than someone trying to trade it in a car in very bad condition.
Therefore, aside from getting ready for negotiation, you need to make sure that your car is in good condition and doesn't have major problems in the 1st place.
Why do car dealers offer so little for trade ins?
In addition to the mentioned reasons above, dealerships do not usually put aside a lot of money towards trading cars.
In other words, the dealership does not consider purchasing many cars as threatens and holds them until they're ready for reconditioning and then selling. For them, it's frozen money, and the fewer they do it, the better for them.
Most dealerships are usually interested in putting their money towards brand new vehicles. They have multiple options for people interested in buying brand-new cars instead of those looking for used vehicles.
Why is trading lower than a private party?
As we mentioned in detail in the previous sections, training values are usually lower than private party values, which is not surprising. The dealership has to take your vehicle and recondition it before selling it to the next buyer. On the other hand, the private buyer is ready to buy your car as is and drive it immediately.
Also, when you sell your car to a private party, you have the flexibility and the freedom to choose the price you're looking for. The lower the price, the more people will reach out to you to purchase the vehicle. However, no one can force you to offer a lower price than what you're looking for. Of course, if you ask for a very high price, private buyers will most likely not. It will take you a long time to get to the right buyer compared to when posting a lower price.
When should you wait to trade in?
While you need to understand the different factors involved in the trade in value, it's also a must to know when exactly not to trade in your car.
In general, if you've just purchased your car recently, you won't get a very good trade in value because the vehicle's value drops by somewhere up to 20% immediately after you walk out of the dealership.
Also, if you feel that the dealership is not providing you the offer you're looking for and the value they propose is significantly lower than the market value, that's when you shouldn't accept the deal, and you'd better sell your cars or private buyer or to a car removal company like Cash Cars Buyer.
It's also important to keep an eye on seasons. Sometimes the dealership might allow for faster trade ins when they want to get rid of their older cars towards the beginning of the new year. That's when you might need to check with the dealership and see how much they're willing to pay for your old car.
Do dealerships give you KBB on trading?
Not even close! Most dealerships do not consider the KBB value or even any wholesale values. They will have their own calculation criteria to determine the trade in value for your car.
That's why we always recommend you understand what KBB is telling you because that's a good negotiation point to tell the dealership that they are offered trade in value is very low.
Conclusion
Understanding trade in values is a must skill for those planning to purchase a new vehicle and trade in their older cars. The first thing you need to understand is that trade in values will be much lower than what you're expecting.
Many people see trade-ins as an opportunity, so they don't have to pay high taxes twice on the sold value and the new car. Other people see it as and discouragement, which means that they prefer selling their cars to a private buyer.
If you don't want to deal with all the hassle and trading in your car with a dealership, you might need to consider Cash Cars Buyer. Cash Cars Buyer is willing to purchase your old car and pay you the top dollars within one to three days only!
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- Describe your vehicle’s type and condition
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