Friday, June 20, 2008

"What's my Trade Worth?"

The biggest deal breaker in the car business is the value of the trade. Have you ever wondered why one dealer would give you one price and another would give a different price that could be thousands of dollars more or less?
Let me tell you a story from early in my career, it happened around August of the year 2000. A gentlman was interested in a used late model Ford Taurus that had been on the lot for awhile, and was advertised in our local paper for a rock bottom price of $8995. His trade vehicle was a 1989 Mercury Cougar that had 180,000 miles on it. There was only about $100 dollars profit left on the front end of the Taurus, and the customer had stated that if were to buy the vehicle he would pay cash. I had no choice but to show him actual trade value for the Cougar. The car was a bit rusty and the transmission was slipping a bit. Our used car manager was only willing to put $50 bucks in the vehicle. I showed him the numbers, and I told him that we were only willing to give him $50 bucks for his trade. He became very offended, and he told me that a rival dealership was giving him $2000 dollars for his Cougar, and that he would rather buy there. I asked him what they were selling their Taurus for, and he told me it was a little more. I asked him how much more, and he told me the price of the rival dealers Taurus was $12,995. I then explained to him about the trade difference. I asked him to imagine for a second that the other dealer was only giving him $50 dollars for his car and discounting their car $2000. That left the trade difference at $10,945. Our trade difference was $8,945 which was a 2000 dollar difference. I then explained to him that is what the other dealership was doing, taking $2000 from the Taurus they were selling and showing it to him in trade value. While our Taurus was originally 12,995 before the ad price, we had already discounted it $4000 and thus could not show him $2000 for the Cougar without raising our price $2000, which we were willing to do, but it would be kind of pointless because it was the same amount of money. He could understand what I was saying, but he was still a little aprehensive because he thought his car was worth more than that. I told him if it would make him feel any better, he could go home and call every dealership in the area and try to find a 1989 Cougar for sale for $2000 dollars. If he couldn't then he would know I was right. He came back in the next day and paid cash for our Taurus, and he became a valued repeat customer years later.

So how can you find out what your trade is really worth when dealerships play these kind of games with the numbers? It is very easy if you have online access. My favorite site to use is A common mistake customers make when using this site is putting in their auto information using "excellent" condition. Most dealers will not give you excellent condition, because lets face it, no matter how good of a condition your car is in, chances are it has miles on it. If it has miles on it, it is a used car, so expect to get good condition value for it unless it is rough. If you have a printer, it would help you to print the page and show it to your salesman when the time for negotiations come. I liked it when customers did this because it made things easier.

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