So, you’re in the market for a new car and have decided to trade-in your old vehicle at the dealership, rather than trying to sell it yourself. Sure, you’ll earn less trading your car in than if you were to post an ad online and sell it privately, but the convenience and knowing you won’t be held liable if anything goes wrong overshadow that shortcoming. Still, sitting in the showroom, concerns begin to pop up: The dealer might lowball its offer for your old vehicle. How do they come up with trade-in values? Well, they don’t do it by pulling a number out of the air. Instead, there are several factors that go into determining your trade-in’s value.
Age
For a couple of reasons, age is a key consideration for dealers when evaluating a trade-in. A used-car buyer will likely be more attracted to a newer used car, as it offers many of the features found in a new car but at a lower price. Dealers also like having newer vehicles in their inventory, because they should generally be able to sell those more quickly than older ones.
Mileage
Like age, mileage plays a huge role in determining how much a trade-in is worth. A low-mileage vehicle will bring in a higher offer than a high-mileage one. As we said about age, dealers know a low-mileage vehicle will sell faster than one with high mileage. Even if you’ve meticulously maintained your high-mileage vehicle, it might still be a hard sell.
Condition
Image is everything when it comes to selling or trading-in a vehicle. If you show up with a vehicle covered in dents and scratches, you’re not going to receive a good offer. This is also true for the interior. Ripped-up upholstery, stains on the seats and carpet, or other cleanliness issues will result in a lower price. Bringing in a vehicle that’s clean inside and out will make a dealer think you have taken very good care of your vehicle, resulting in a higher offer.
Make and Model
Certain makes, like Subaru or Jeep, often get a higher trade-in value than others. The reason for this comes down to what’s known as depreciation. Basically, depreciation is a product’s loss of value over time. On average, a new vehicle will lose around 10 percent of its original value within its first year, but some vehicles will see their values drop by as much as 50 percent. A few factors influence depreciation, such as the reputation of the brand, the vehicle’s color, and which features are included on a particular car. This goes deeper when it comes to individual models. A brand may have a poor record in terms of depreciation, but one of its models may hold value quite well due to exclusivity, for example.
Desirability
Simply put, a vehicle’s desirability will have the most effect on how much value a dealership will assign to it. Many traits fall into this category, but we’re going to focus on two of the major ones; seasonality and market demands. With seasonality, certain types of vehicles will earn higher trade-in values at particular times of the year. Take convertibles, for example. The best time to trade-in a drop-top is in the summer, because buyers want to enjoy the warm weather, and dealers will pay top dollar to get their hands on a car in high demand. Try trading one in during the winter and you’ll receive less money, because the dealer knows it will take a long time to sell it.
As for market demands, this is where external factors take a starring role. A few years ago, hybrids and smaller vehicles were hot items because of high gas prices. Currently, consumers are gobbling up crossovers, SUVs, and trucks partly due to lower gas prices. Dealers pay close attention to these types of trends and will pay more for vehicles that are in high demand.
Trade-ins represent one of The Five Levers of a Used Car Deal. Keep these factors in mind when it comes time to trade in your old car for a nicer one, and you’ll have a leg up in negotiating a great deal.
Related Topics
The Truth About Trade-Ins
How to Get the Most for Your Trade-In
Should You Sell Your Car Yourself?