What is the difference between wholesale and trade-in vehicle values?
The wholesale value is the average price that auto dealerships are paying for used cars usually through auctions or from another dealerships. This information is collected from across the country by used car value guide publications such as The Canadian Black Book or The Canadian Red Book. The trade in value is the amount that a dealer is willing to offer its customer for their used vehicle against a sale of a newer vehicle. Generally, customers "trade-in" their current vehicles to a dealership in order to help facilitate a new vehicle purchase.
Being that trade in values depend on a number of factors as explained below, it is best for a customer to try and obtain the current wholesale value of their vehicle. As previously stated, to get an idea of what dealerships across the country are paying for similar vehicles at auctions or from one another. Generally speaking the offer from a dealership for a trade in should not vary that much from the vehicle's current wholesale value, but it will be lower. No matter what condition your vehicle is in a dealership will still have to invest some money and time into a traded in vehicle to ready it for resale. The advantage you have in knowing the vehicle's wholesale value is that you will be aware of whether or not a dealership is offering you a fair trade in price for your vehicle.
How does the used car trade-in process traditionally work?
If a customer has a trade-in, the local dealership will generally perform a complete appraisal of the vehicle to determine the used car value. The appraisal typically focuses on: physical appearance, mechanical condition, vehicle service upkeep, mileage, and current market conditions. These factors are then judged against a used car value guide, such as Canadian Black Book or local auction results, and sometimes adjusted based on time of the year and local market vehicle preferences (e.g. convertibles are worth more in summer than winter). Based on all these sources an actual cash value of the used car trade-in is determined. This is the amount of money that the dealership is willing to pay for the used car trade-in. At that point, the customers may either accept the valuation or choose to sell the used car by themselves. If the customer accepts the trade-in appraisal, then the trade-in becomes part of the overall new car buying experience.
How are used car trade-in values determined?
Each used car, truck, and SUV is unique. This individuality is what makes used car value appraisal an inexact science. Tools such as The Canadian Black Book and Canadian Red Book serve as guides to car dealers to help them appraise the used car. These guides provide a starting point to assess the vehicle. Ultimately, the vehicle's physical and mechanical condition, local market conditions, potential reconditioning costs, auction results, the dealership's own assessment, and wholesale guides provide the most accurate and realistic assessment of a used car's value.
How do market conditions affect the used car trade-in value?
There are several different market conditions that can dramatically affect the used car value. These include: manufacturer incentives, local preferences, and vehicle availability. Manufacturer incentives on a specific new car may drive down the trade in value of the corresponding used car. For example, if Ford is offering a $1,500 rebate on a new Explorer, then the trade in value of a used Ford Explorer could drop by a similar amount. This formula is applicable for discounted financing, special leases, or manufacturer to dealer incentives. Since the new vehicle is now more affordable, there must still be a significantly lower price to attract buyers to the same used car. Additionally, the wholesale value as represented in The Canadian Black Book or similar guides may not reflect these incentives, thus a car dealer would most likely deduct the value of the incentive from the printed value before beginning a trade-in appraisal. The preferences of a local market may also affect the value of a trade-in car. Vehicle availability can also impact the used car value. If a vehicle is readily available at local auctions, the demand for the same vehicle as a trade-in would be lessened as would its value. Conversely, hard to find and hot selling used cars can bring very strong bids from car dealerships.
I have an older car with high mileage. What can I expect?
Older cars, or used cars with mileage over 100,000, are often difficult for car dealers to accept in trade. Reconditioning expenses can make those used cars cost prohibitive for a dealer to sell on their lot, and generally they will sell that car to a local wholesaler at a steep discount relative to wholesale guides. These types of used cars generally bring the highest value when sold privately.
What can I do to increase the value of my used car trade-in to a dealership?
There are several small steps that you can take to help ensure that you get fair value for your trade. Foremost, be sure to know what your used car is approximately worth. Additionally, before you take your vehicle to the car dealership for appraisal, make sure your car is clean, both outside and inside. Appearances definitely matter. Furthermore, bring all service records, and your current registration and the title to the used car. If you do not yet have the title, bring the lien holder information, as well as an accurate loan pay-off amount. This information makes it easier for a car dealership to quickly complete the transaction. If you have any current mechanical problems or dents and such, you will want to compare the costs of fixing these problems with the reduction in used car trade-in value. Often it is worthwhile to repair any problems, however sometimes it is not worth the efforts and expenses involved.
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