The whole trade in process is one of the most commonly misunderstood part of the whole car buying process, so the following example and information hopefully will make this whole concept easier to understand.
Firstly, the most important thing to grasp when you are asking any dealer to trade your existing car is this: You are effectively asking us to buy your car from you.
We have all seen the TV shows ‘’Pickers””, and ‘’Pawn Stars” right? It’s the same concept- We are a car dealer. We can’t pay retail money for cars. We aren’t looking to keep your car to own ourselves. This is reason alone why the “but mate, I spent $5000 on the engine mods and $8000 on the custom paint” really means nothing when it comes to the realistic value of your car as a trade-in. All it means is that when it comes to resale, it MIGHT make your car more appealing than the one down the road, BUT sadly it doesn’t make it worth thousands more. This is why it’s often best to trade a stock standard car, and serves to explain why we would never be interested in trading highly modified cars.
So, with all this in mind, we naturally are buying your car from you at a wholesale price, that allows us to make a profit when we sell it, whilst also allowing for the considerable costs and risks involved for us to do this. In effect, to sell our car, by trading yours as part payment, we effectively now have to do double the work, spend twice the money, and take double the risk. This probably also clearly explains why we aren’t going to be “swapping” your car on one of ours either…
To get a ballpark idea what your car is worth as a trade-in, go to Redbook as a starting point, but bear in mind that this is a very rough guide only, and current market fluctuations can significantly vary this.
Many customers end up disappointed with the trade in process, because they somehow think that their car is worth retail money. It should now be apparent that it isn’t. Your car is worth wholesale price as a trade-in. If you want to get retail money, our best advice is to sell it privately (at the cost of all the dramas and inconvenience that comes with this…) and then come and talk a cash/no trade in deal. Any dealer that kids you otherwise is lying to you. That’s the sad but honest truth!
So assuming you understand all this, and still want to trade your vehicle, the following example will serve to illustrate the real situation that many car dealers have hidden for years, and in many ways, remains a “trade secret” to this day. In the interests of us doing honest and transparent deals with our customers, read on to bust the myths…
We have had someone say to us: “yeah a dealer down the road told me that my car is worth $10000 as a trade but you are telling me its $8000. How come? Are you guys ripping me off??” No, we aren’t. Quite the opposite- we are being 100% honest with you about what your car is really worth.
You are looking at a 2012 Toyota Landcruiser at Shonky Motors, and they have listed the car at $60000. You take your 2008 Toyota Hilux to get a trade in price, and they tell you it’s worth $10000 as a trade in. The changeover figure, or the REAL AMOUNT you have to pay to own the Landcruiser, is $50000, plus your Hilux as a trade in.
You then see the exact same spec Landcruiser on our stock list, advertised at $57000, some $3000 less than the car you looked at down at Skonky Motors. You ask us to price your car, and we tell you that your Hilux is in fact actually only worth $8000 as a trade-in. Wow, we are ripping you off, right? WRONG! DO THE MATHS!
The change-over price to own our Landcruiser, or the amount you actually have to pay on top of your trade in, in this example, is $49000. That means, in this case, that you are $1000 better off!
As you can see, because we priced our Landcruiser at a sharp price for a cash buyer, we do not have the extra $3000 in the car that Shonky Motors do. This is known as the “dealer loading” to allow an over-inflated trade in value to trick the customer into thinking their trade in is worth way more than it really is, as its human nature to focus on what YOUR trade-in is worth, as opposed to what you are REALLY paying. In fact, most people can clearly tell you what they got for their trade in years down the track after doing a deal, but rarely can recall what the changeover price was or the window price of the car they purchased. Think about it… its probably happened to you or someone you know. Don’t ever be a victim of this trick!
So in this example, you can see that whilst we cant offer you a grossly inflated (and unrealistic) trade-in valuation of the Hilux at $10000, you are actually $1000 better off.