Why Is Trade-In Value Less Than Private-Party Value?

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Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - June 16, 2021

When you look up your car’s value on an online valuation site, you likely notice more than one value listed. Two of these are trade-in value and private-party value – trade-in value is generally the lower of the two. There’s another value to consider, too, called retail value.

Vehicle Values Differ

Your car has multiple values, depending on who you want to sell it to and who you ask. There are three main values you should care about:

  • Retail value – What a dealership may sell a vehicle for.
  • Private-party – What a private buyer may pay you for your car.
  • Trade-in value – What a dealer may pay you for your vehicle.

Typically, the retail value of your vehicle is going to be the highest, then private-party, followed by trade-in value.

The estimated values you may see on a valuation site, such as Kelley Blue Book and NADAguides, may not be exactly what you’re offered by a dealer, and all valuation estimates can vary. Your car’s age, condition, mileage, location, and even the time of year can play into what you may get for a trade-in offer. While they can vary, online valuation sites can be a great resource for you to estimate what your vehicle may be worth in the current market.

A dealer’s stock can also influence how much they’re willing to offer for your car. For instance, right now it’s a seller’s market. Many dealerships are experiencing stock shortages, so trade-in values are high right now which can be good news for you if you have a desirable trade-in.

Why Trade-In Values Are Lower Than Retail Price

Trade-ins are often bought to be sold later. Dealers typically take in trade-ins with the intention of selling them as used vehicles on their lots. This is why you’re likely to see the trade-in value lower than the retail value of your vehicle, since dealerships aim for profit on the sale.

Dealers typically handle transferring titles and plates for you, they prep the car for sale, and conduct evaluations and inspections on the vehicle to prep it for a buyer. A trade-in that’s slated to be sold also takes up valuable space on a dealer’s lot.

When you trade-in a vehicle, the most you’re likely to need to do is provide the title and a signature. The sale process for you is likely to be stress-free because the dealership handles most of the grunt work. For all those reasons, you may make slightly less on the sale of your car if you trade-in vs. selling it yourself.

While you may be able to get more for your vehicle selling it yourself, trading in a car is arguably much more convenient. The proceeds from your trade-in’s equity can also be used to lower the selling price of your next vehicle if you’re purchasing from the dealership. Trading in your car can get two birds with one stone: sell your old car and use the profit to save money on your next purchase. And the dealership handles the paperwork!

Want More for Your Vehicle?

Right now, trade-in values are reaching record highs. This is mostly due to the low stock that dealerships are experiencing because of production issues during the pandemic. There’s a global chip shortage that’s seriously affecting the amount of brand new vehicles that can be made, so dealers are in need of stock. Demand is shifting toward used cars, which is great news for borrowers with a trade-in looking to upgrade.

If you’re looking to trade in your car for something else, now could be the time to do it.

Here are a few insider tips on getting the most out of your trade-in:

  • Don’t completely clean out your vehicle – If you completely strip your car of all your personal belongings and clean it top to bottom, it can give the impression that you’re eager to sell. A dealer may take the hint that you’re in a rush, and may be less willing to negotiate or budge on price (but we wouldn’t recommend showing up right after mud bogging!)
  • If you’re buying, negotiate the trade-in last – It’s recommended to negotiate the selling price of your next vehicle before you mention a trade-in. A dealer may be less willing to haggle on the price of your next vehicle if they know you’re already knocking down the selling price. Treat the trade-in and your next purchase as two separate transactions for a little edge.
  • Look up your vehicle’s values – Knowing what your car is realistically going for in the current market is a great way to start negotiations. If a dealer tries to low-ball you but you know what your car’s estimated trade-in value is on average, you can easily counter it and start a conversation as to why they’re offering you less.
  • Get multiple quotes – It’s a good idea to get at least three different trade-in offers from three different dealerships. We recommended getting at least one offer from a large, franchised dealer that sells your vehicle’s make (such as a Ford dealer). A dealership that sells your car’s make may be more likely to give you a higher offer and could give you negotiation power if you want to work with a specific dealer.

If you want more cash for the sale than what a trade-in offer is likely to yield, then it may be worth your time to sell it yourself. Private-party transactions allow you to list the vehicle on your own terms, and look for the right buyer for your situation. However, you must handle the listing, transferring of ownership, and all paperwork involved yourself – including heading to the Department of Motor Vehicles or Secretary of State.

Trade-Ins Can Help Bad Credit Borrowers

If you have poor credit, you may be aware of the possible down payment requirement of an auto lender. If you don’t have at least $1,000 or 10% of the vehicle’s selling price in hand, then it’s possible your trade-in could save the day. Trade-in equity is considered cash down on an auto loan.

Cash down and trade-in equity can increase your chances of qualifying for an auto loan. It shows you can save up for an auto loan, lowers the amount you need to finance, and decreases your monthly payment on your next vehicle – all of which increases your approval odds as a bad credit borrower.

However, even if you have cash on hand and/or a good trade-in, not every auto lender can assist with credit challenges. If you’re in need of vehicle financing and you’re ready to upgrade your vehicle, then start right now with CarsDirect.

We’ve cultivated a nationwide network of dealers that are signed up with subprime lenders. These lenders know that you’re more than a credit score, so they look at many additional factors surrounding your ability to repay a car loan. To get matched to a special finance dealership near you, fill out our free auto loan request form and we’ll get right to work.

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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