Trade-In vs. Retail Value

Trade-In vs. Retail Value
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Trade-in and retail are two values that car dealers apply to used vehicles. A car buyer can find these values on a number of vehicle valuation websites. The actual trade-in and retail values vary depending on the website, so the best way to arrive at realistic values is by averaging the prices together from multiple websites. A car buyer can save money by using these valuations during negotiations at the dealership.

Trade-in Value

Trade-in value is the price that a car dealer is willing to give you for your old car when you buy another model. The trade-in value is lower than the retail value. The reason for the lower amount is the dealer may need to repair or make other modifications to the car before placing it for sale on the used car lot.

Retail Value

Retail value is the price that a dealer wants for a vehicle that is for sale on the car lot. The retail value is higher than the trade-in value because the price includes any repairs or modifications made to the vehicle, as well as a sufficient profit for the dealer. Depending on the final condition of the vehicle, the car dealer may add or subtract to the base retail value before placing it for sale. The dealer usually indicates the final retail value by writing it on the front windshield of the car.

Find the Values

Use a search engine to find two or more car valuation websites. Go to the first website and follow the prompts to determine the trade-in and retail values of the car you want to buy. Print the information and repeat the steps on at least one other valuation website. Average the prices together to arrive at a final trade-in price. Repeat the process with the retail values. Use the numbers as a reference when you negotiate the purchase price for your next vehicle. Your goal is to pay an amount that is closer to the average trade-in value than the average retail value. The car salesperson you speak with at the dealership will try to get you to pay full retail to make a higher commission.

Negotiate the Purchase Price

When you're ready to buy, offer the average trade-in amount you researched earlier. Offer less if you think the car is not worth the full trade-in value. The salesperson likely will come back with a counteroffer. If the offer price is less than the average retail value you can either accept it or make a counteroffer of your own. Continue the negotiation process until you agree on a sales price, or look for a car at a different dealership if you cannot come to terms.