HOW DOES THE DEALERSHIP DETERMINE MY CAR’S TRADE-IN VALUE?
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 dealerships 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 Canadian Black 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 in order to cover costs for any needed repairs, cleaning and detailing, advertising and marketing the vehicle, and paying a commission to a salesperson.
The Risks of Taking a Trade-In
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 VSA Licensed dealer will 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, the cost of the vehicle can exceed the market value 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. Unless you are trading in a newer vehicle in excellent condition, the dealer may sell it to a wholesaler. Another scenario is that your vehicle is sent off to an auction for whatever someone is willing to pay for it.
How Trading-In Benefits You
Trading in your vehicle can be a real advantage to you. Selling a car privately can present challenges including having to market the vehicle, go for test drives with potential buyers, and not being certain that buyers have reliable finance sources.
The tax advantages of trading a vehicle also have to be taken into consideration. Depending on where you live, trading in a vehicle can reduce the amount of tax you have to pay on your new vehicle. In British Columbia, you only pay taxes on the price difference between the trade-in value of your car and the purchase price of the vehicle you buy. As an example, if your old vehicle is worth $35,000 and you buy a $60,000 vehicle, you only have to pay taxes on the $25,000 difference. That extra tax you don't have to pay is the same as money in your pocket and without the hassle of selling the vehicle privately!
We Shop Around to offer You 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 let us shop around to find you the best value for your trade.
Subaru of Cranbrook makes it easy for you to get a good idea of what we’ll give you for your trade with our instant trade appraisal tool. Just fill in the information about your current vehicle, and one of our Product Advisors will follow up with you.