By David Maillie
So what really happens when your car dealer “evaluates” your car and what is behind that mystic trade in value? Do the used car manager and/or new car manager just pull numbers out of the air? Do they really use a book to classify your car and if they do, which one? Do they try and steal your car for as little as possible? And how do you get the highest trade in value possible for your car? Well, at most car dealerships whether you are looking at a new or used car doesn’t matter. The process is still the same. While you are out on a test drive the used car manager will take your car and check it over. They will subtract for any problems and then usually start with the black book value for rough condition. This does not mean that your car is in rough shape at all. That is just what they will usually start at. Their reason for this is that they can easily get a wholesaler buddy of theirs to pay a higher price for this and pocket the rest or if they have some wholesale losses they can write off some of that loss with the gain here. Now, I said black book. I did not say blue book (commonly referred to as Kelly Blue Book (KBB) which has very high retail prices in it that you will never see except for when you look at the used cars for sale on the car dealer’s lot). I also did not say yellow book (the NADA yellow book (this has retail prices similar to KBB but a little lower). I said Black Book which can only be bought by licensed car dealers and wholesalers. This black book has wholesale prices which one could expect to see at a dealer only car auction. These prices are much lower than the retail books customers may see and read. So, for instance, lets say you have a car that is in nice shape and has low miles and in KBB it retails for $12,500. NADA may have it at $11,750 and the Black Book rough might be $6550. See the difference? Now, keep in mind, this is just an example and cars do vary greatly in price and demand. But, now back to determining trade in value. Now, if the car salesperson is good and has done their homework they will walk around your trade in with you and point out every little blemish to reduce your high expectations and make the Black Book rough number that much more acceptable (money saving tip - ignore this or better yet point out the flaws on the car you are thinking of buying – this especially works well with used cars - for more tips like this be sure to read our article on how to buy a used car). Repair and restore worn, yellowed and ugly, cloudy headlights to new again with the New Lite headlight restoration and cleaning kit from MDWholesale.com. Specifically formulated and guaranteed for your car.
Now, the salesperson will take you back to their desk and start to talk numbers with you (if they are really good, they will buy you a soda or similar to subliminally obligate you and bring you that much closer to a deal – money saving tip - don’t let them obligate you or make you feel obligated as you will lose money). They will come at you with a four square diagram which lists the full MSRP (Manufacturers Suggested Retail Price) plus and dealer ads (like non standard mud flaps, paint protection, etc…), the trade in value (which the manager will maybe float a little of the markup or front end profit on the car you are buying over to the trade in value to make it look better), the total price (the price of the new car minus the trade and what’s owed if there is a loan currently on it), and the payments and required down payment. The car salesperson and the manager will now try to get you completely off the numbers except for the payments. Once they do this you have been had as you then have no idea what you are paying for the new car and what you are getting for your trade in. “But you like the payments, right?” Once they get you to the payments you have been had (money saving tip – never let them steer you to payments, you steer the negotiations - for more tips like this be sure to read our article on car dealer scams).
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In the previous example the retail figure was around $12,000 for the trade in and $6500 for the Black Book rough value. So the car manager would probably float $500 from the profit on the new car to your trade in value which would make it $7000. Yes, this all depends on the price of the new car you are looking at as higher priced cars have equally higher markups and more money the dealer can play around with. Now, if you are like most people you would most likely go back and forth a little and then finally come to an agreement at maybe $8000, which would be a total of $1500 off the profit on the new car or less if the used car manager comes up off the Black Book retail value. A better way – money saving tip – is to go to the car dealer prepared. Go to CarMax, if you have one locally and get a used car turn in value. They will do this free of charge and there is no obligation. It is also good for several days. If you don’t have a CarMax, then go to several car dealers and write down all prices (money saving tip - be wary of low ball offers as they will not honor them when you go back – the purpose of low balls is to make it so that you will come back and give them the last crack at doing business when you are probably too exhausted and drained to fight and negotiate any more). Then use these figures when negotiating. If CarMax gives you a high enough figure (CarMax usually gives you a solid wholesale figure for your car, but not as low as rough Black Book unless your car really is in bad shape) for your car go ahead and turn it in there and that way you take your trade in out of the process and stand a much better chance of getting a great deal.
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