The Trading Game

Bill and Jane come into the dealership, looking to buy one of our shiny new sedans. They are currently driving an earlier version of the same model. I greet Bill and Jane. They tell me what they're looking for. We find the perfect car, I do a perfect demonstration, and they take a test drive.

They come back bubbling about all the new features that the new car has versus their old car. Bill mentions that they want to trade in their old car. I do a write-up on it, and give it to my manager for an appraisal. We put together the purchase package for them, which on a new car, that first write-up is pretty close to our final offer.

Bill scrunches his face when I get to the trade-in portion of the write-up.

"What's wrong, Bill?" I say, knowing full well what is about to happen next.

Bill and Jane look at each other. "We thought we were going to get more for our trade." Bill says, sitting back in his seat and folding his arms.

"Well, how much were you thinking you were going to get out of it?" I ask.

"Well, ABC Motors said they would give us $1500 more than that." Jane says, looking at Bill afterward for approval.

Pause. If I'm lucky, Bill and Jane like me better than the goofball they dealt with at ABC Motors. After all, they didn't buy from that guy, they came to me. If I'm unlucky, Bill and Jane will go back to ABC Motors to buy from them.

Unpause. "Well, how about if I split the difference with you?" I ask, hoping to keep the deal in a profitable position. More often than not, this doesn't happen.  But it doesn't hurt to try, does it?

"We need $1,000 more for our car." Bill tells me. This will drive our deal down to the red.

I write up their offer. The manager accepts it, and I get to deliver a car.Why would we take a deal that loses us money? Because in new cars, a dealership needs all the deals it can get to hit various performance goals set for us by the manufacturer.

I've seen the above situation play out literally hundreds of times. More often, the customer makes some ridiculous demand for his trade that we can't reasonably accommodate and we lose the deal.

What am I getting at? We don't like trade-ins. Trades are an easy way to make a deal go sideways. It seems you can never give someone enough money for their trade, and you end up putting way too much money into their car than the market would normally dictate. My easiest deals are with customers that either don't have a trade-in, or have a lease vehicle that they need to turn in.

My advice? Stop going to Kelley Blue Book, NADA, and all those sites. None of them are accurate enough to use as a guide. Kelley is 2 months behind the market, and NADA is 3 months. Most dealerships use auction reports to gauge the value of a trade; basically, we look for what a vehicle like yours would cost for us to replace. Using a mix of auction reports, wholesale reports, and good old intuition, we then use arcane alchemy to put a number on your trade.

Which you won't be happy with. But then, that's part of the game, isn't it?

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