How Does the Dealer Determine Trade Value?

Rather than relying on published book values, dealerships use information from auctions and other dealerships to determine trade values. The difference between the dealership’s offer and the book values of trades has been a massively frustrating issue for both shoppers and dealerships, and is a key reason customers distrust dealerships so much.

In 2016 more than 10 million used vehicles were sold at auctions and dealerships rely on that data to make informed decisions. An average of 27,000 cars a day are sold at auction, creating a real time, real market value.

Trim, color, packages, accessories, navigation, sunroof; when a vehicle is sold at auction all the specifics are taken into account and recorded. When an appraiser scans and drives your vehicle they will research what similar vehicles sold for at auction and what other dealers have paid for similar vehicles. They can also see what those vehicles eventually sold for and how long they took to sell. This real-time information is what determines your vehicle’s trade value for the dealership.

The danger in looking for the highest trade number possible is that the dealership will often not accept it. When I was a salesperson there were entire training sessions dedicated to overcoming high book values for particular types of vehicles. More often than you can imagine, customers trading in a late model truck would want thousands of dollars more for their trade than we were charging for the same type of truck on our used car lot.  


That being said, just because dealerships are more precise than ever at determining the trade value does not mean they are going to offer you that fair value automatically. So how do you get the data that they have and demand a fair trade value? Read: Real Leverage in a Trade Negotiation.


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