Tag Archives: trade-in

How Does a Car Trade-In Work?

What is the car trade-in process? Do I lose money by trading?

Here is how a car trade works.

Car dealers buy your old car from you and give you credit toward the price of a new car. The trade-in credit is like a down payment and reduces the price of your new car, making your monthly payments smaller.

The dealer then puts your old car on his used-car lot to sell, or he sends it to a dealer car auction where another dealer will buy it to put on his own used-car lot.

Contrary to some belief, dealers don’t simply “trade” or swap one car for another. It’s two separate transactions rolled into one contract.

Dealers make a lot of profit on selling used cars they’ve taken as trade-in. They pay the trading customer a low wholesale price, and sell the car for a higher retail price. That’s how they make their money and stay in business. Continue reading How Does a Car Trade-In Work?