I Traded in My Last Car at a Dealership. Was That Stupid?

I traded in my last car at the dealership, though I wasn’t confident in my decision to do so. I had that icky feeling I might be being taken advantage of, the same one I got when negotiating the price of my new car, the same one I get whenever I have my car repaired, I guess basically the same one I feel every time I spend money related to a car.

I did the deal anyway because I wanted the most convenient option. Next time, however, I’d like to know more about my choices. I asked Philip Reed, consumer advice editor for Edmunds.com, a car information Web site, a few questions about trade-ins.

Generally speaking, can you get as much money for your car if you do a trade-in as if you sell it yourself?

Absolutely not. The trade-in price is at or below wholesale or auction price. There is a special price listed on our site for “private parties.” Use this link to appraise a used car and you’ll see that there is a trade-in value, a private party value, and a dealer retail value. The trade-in value is what you can expect the dealership to pay you, and the dealer retail value is what the dealership likely will try to sell the car for. The dealership may give you $15,000 and then turn around and try to sell the same car for $20,000 or $22,000. The private party value is somewhere in between and it is what you could expect to get if you sold the car to another individual.

So when people see those numbers, they probably think they should sell their own cars, instead of letting the dealership make all that money?

Well, yes. The dealerships’ response would be that they may do re-conditioning, they have overhead and they may be selling some kind of a warranty. So there is added value. Still, it is important to understand when you trade in, you are giving them something they fully intend to make money on.