Beware of the Trade-In Trap

It's hard to pin down the true value of the used car you're driving. But car people easily can determine that value, called "wholesale value." Wholesale value is the amount of money a person or company will pay for your car when intending to resell it at a higher, or retail, price.

Credit Union Magazine columnist Remar Sutton says the goal of car people is simple--to determine your old car's true wholesale value, then give you less than its wholesale value. The trick is called "lowballing" or "underallowing," and here's how it works: An appraiser determines that your old car is worth $5,000 and lists it as an asset on his company's books at $5,000-but the appraiser only gives you $4,000 for it. You just lost $1,000.

Your only defense against lowballing is to determine your old car's true wholesale value before you let any dealership or buying service appraise it.

This process can make you a couple of thousand dollars. Make your old car look new. Then drive it to at least three used-car operations near you. Tell the person who waits on you that you are interested in selling your old car outright, not trading it. The highest firm offer you receive is your old vehicle's true wholesale value. (Because you actually may wish to sell your car to the used-car operation that made the highest offer, ask how long they'll stick to that offer.)

Knowing your car's true wholesale value gives you tremendous power in the car transaction, Sutton explains. If you know it's worth $10,000, you're not going to let a dealership or Web site or online buying service tell you it's worth only $8,000. Just say "no" to the offer, and sell your vehicle to the used-car operation that put the $10,000 "buying" figure on it.

© 2008 Progressions Credit Union

Phone 535.0191 • Toll-free 1.800.828.8691

Terms of Use • Privacy Policy • Volunteer Login