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What Do The Dealers Pay For Trade Ins

Happy Holidays Folks,

Well I’ve come back to the forums for some advice and wisdom on Used Car Pricing. I have been doing some research and have tried to look at this logically, which makes me think I’m going about it the wrong way. I am trying to determine what is the most likely price a dealer is willing to “pay” for a used car trade in. The specific car in question is a 2007 Honda Civic LX with 85,000 miles on it. I am not trading this car in but am interested in purchasing it.

My philosophy is that car dealers, like anyone one else, need to make a fair profit at what they do. I’m not out to beat anyone down to try and get a “steal”, I just want a fair deal. If it’s fair for both parties I think the resolution should be relatively quick and painless…that’s just good business for everyone. In my case the dealer is asking $12,000 for the above car.

So I go to KBB and research this car as a trade in. I plug in the optimum scenario for the car - all the options, excellent conditions, and so on. this represents the absolute top value this car would be considered at for trade-in. Of course this is KBB’s opinion but I am assuming that have some stats to back those numbers up. The KBB trade in value comes in at $8301.00 max.

To that value I’ll throw in an extra $1000.00 for detailing, minor repairs, and associated costs. Then I figure add $1000.00 on top of that for profit and that brings me to $10,300 that I think is a fair price to both parties. I’ve never sold cars and everyone I know has “scum” salesman story. I have worked extensively with the public though and I know how they can be. I imagine a good part of the car salesman are the way they are because of how they’ve been treated by this same public. I don’t want to insult them with an unreasonable price and I think my method gets me close to a fair price as any I’ve come across.

If it is fair and they won’t go for it then business is business and I look elsewhere. However I it does me little good if my pricing scheme is inaccurate and insulting. I’m interest to hear your advice and wisdom on the subject.

Thanks in Advance,

Old School Ninja

There are too many caveats to say what a fair price is to get for your trade-in. Your best bet is to sell it yourself. Dealers LOVE trade-ins because they play the numbers game. And they are good at it. They offer you big number for your trade in, but then low-ball you on the vehicle you’re buying. They want to make a profit on the new car they’re selling you and on the car you’re trading in.

Offer them what you think is a fair price seems to me you have done your homework,good luck-Kevin (yes they make good money on used cars)

I am guessing you want to buy this if that is the way I read it. Your price then is reasonable but it may not be for the dealer selling it. The dealer does not care about selling the car to anyone in particular while you are interested only in this car. IMHO, the best way to buy a used car is to switch the scenario and look at several cars at once that are acceptable to you and start negotiating until you get the price you want on any one. I always have better luck making sure that the seller knows what I am doing. I want them to feel they have to work from my price, not theirs. To do this, you can’t be in love with a car and you can’t take anything personal when you talk. Be cordial, friendly and firm. When you finish, it make take more time, but you tend to be more satisfied by looking at several cars and offers at the same time, and choosing the best. Btw, don’t feel bad about any price you offer. It’s just a negotiation and as longas you are respectful, any offer will not be taken as " insulting". Heck, dealers ask insulting high prices all the time and I don’t get upset.

One thing they try to do, is ask you what do you want to pay for a car. I always start off with zero, " I want it for free" if they laugh or get upset, I reply, " don’t ask me an obvious question" Othwise, they categorize you and try to move into a deal on particular cars that maximizes their profit.

Some of what dealers have as used cars comes from regional auctions, so they may pay close to KBB value or they might not, they might mark up the used cars a little more to offset some of the big discounts on New cars. Particularly on cars in high demand.

I haven’t had that many trades but you will find there is quite a difference in pricing from one dealer to another depending on the location. Some dealers, especially in the smaller towns are more proud of their used cars than the larger dealers, or else they had to pay more for them in the first place. Also they seem to use the NADA prices and not Kelly. Best you can do is check prices on a number of similar cars to see what they are advertised for to get a better idea of what you can get one for. Then you can see if one dealer is higher priced or not. A car though with 85K on it should be priced lower normally. People like them with 30-50K but not 80-90K.

Your figures on the pricing are reasonable. You didn’t add in some wiggle room into it. Offer $9,500.

If the dealer wants $12 K and you offer $10 K, that seems totally reasonable to me. I expect if the dealer can get $10.5 K, he’ll be happy. He’d probably sell it for $9-9.5 K if it has been sitting on the lot for a week or two and not moving, provided he had an all-cash offer. I expect he probably paid $6 k to $7.5 K for it.

Last used car I bought I offered 1k less than minimum trade value. It was a good car in good shape but needed brakes and a pinion seal, 80k later was a good deal and the guy was happy enough, sure I can sell it for more than dealer offers, did not work out for him. After 3 months of holding the car he was happy to close the deal as I went up 1k to the minimum trade in value.

A few years ago, when I was still working at a dealer, I bought a car which had just been traded in.

The dealer gave the guy who traded it in $5K, exactly the book value. I negotiated a deal for $5500, a very nice price at the time, actually. When the service manager caught wind of that, he was irate. He said “Let him have it for $5500, because a deal’s a deal. But we shouldn’t have agreed in the first place, because we could have detailed it and easily sold it for $9000.”

Black Book trade in for average condition is $7250. Retail is $10275. Don’t forget that the asking price of a used car often contains room for a “discount” to be shown as a down payment. Dealer may not be willing to reduce the price for a cash basis if he thinks he can make money on the financing.

You don’t say whether it is a coupe or sedan or if it has a manual or automatic transmission. If we assume a sedan with auto, Edmunds says a fair dealer retail is $10,155 and trade-in is $7446. I also assumed outstanding condition. How long has the car been on the lot? If it has been there a while, they will be more interested in dealing. I wouldn’t pay more than $10,200 for it unless there is something unusual about it. BTW, there were no factory options except color for this car, and I wouldn’t pay extra for dealer installed options.