How the Trade-In Appraisal Process Works
The used car appraisal process may vary slightly at each dealership, but the principles of the trade-in process is basically the same. The entire process normally takes anywhere from 15 to 30 minutes depending on how busy the used car manager or appraiser is at the time. Every appraiser is different, some appraisers will go through your car with a fine tooth comb and others may just look out the window at your car. Keep in mind, an appraisal is just someone's oppinion of what your car is worth. There is not a scientific method or secret book that tells the true value of any used car.
Do not tell the dealer you have a car you would like to trade until you've agreed on the purchase price of the vehicle you want to buy. Most dealers automatically assume you're trading a car. So stick to your guns, stay in control, and don't bring it up your trade until you're ready.
Always look at the car buying process and the trade in process as two separate transactions. This will make it harder for a dealer to attempt to rip you off on your trade.
Once you've told the dealer you have a trade. You will hand over the keys to your vehicle and the salesman and he will take them to someone, normally the used car manager, to appraise your vehicle.
In this section I'll explain to you what happens during the time you turn your car over to the dealer to the time the salesperson presents the numbers they've calculated as the value of your trade.
What you will find in this section:
How the Appraisal Process Works in a Car Dealership
Dealers like to find out if you have a trade early in the car buying process. Most dealerships have one or two designated people that value all the used cars coming in on trade. The timing of the process may be little different, but the actual appraisal process is basically the same amongst all dealerships.
There are four important steps to getting your car appraised by a dealership, I've broke down the entire process below. It begins with handing your keys over to the salesman and ends with the dealer presenting you the value of your trade.
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1) Handing Your Keys to the Appraiser
When you tell a salesperson you have a trade-in, he or she will ask for your keys so they can retrieve some information from your vehicle.
"NEVER give your only set of car keys to the dealer"
When turning your car over to the salesperson, always give them a spare set of keys. If you don't have a spare, take your car key off your key chain before handing them over.
Good salespeople will use certain sales techniques when inquiring information about your trade. They may even ask you to come out to your car with them to help, "sell your car to their manager." They'll begin writing information down like the year, make, model and mileage from your car for the used car manager or appraiser to use later during the appraisal process.
They may even ask you a few questions like, "how many miles on your tires," or "has the vehicle ever been wrecked, repaired or flood damaged?" After asking you a few questions, the salesperson will then get really quiet and start to do a "silent walk-around."
2) What is the "Silent Walk-Around"
A salesperson or manager will walk around your trade-in and touch or point out every little dent, crack, worn tire, scratch or in-perfection, and not say a word. They may nod or scratch their head, looking concerned, to let you know they have found a discrepancy. Don't worry, this is all a part of the silent walk around. All they're attempting to do is mentally devalue your car in front of you so think it's not worth as much as it really is.
When a salesman does a silent walk around, most customers will start making up excuses right away about every little door ding. Don't let them get in your head, if you start making up excuses you're letting them win. Only speak if they ask you a question. Don't worry about every little thing he touches or sees, it's all just an act.
Read my section for tips and tricks on how to get the most money for your trade-in.
The Used Car Manager or Appraiser's Role
After the salesperson gets the information from you and the car, they will take the information and/or the vehicle to the appraiser.
Most of the time it's the used car manager that appraises all of the trades, he'll go through a mental checklist, thoroughly inspecting the vehicle. His overall goal is to find discrepancies to help lower the value of your trade.
3) What Does a Used Car Appraiser Look for?
If he's good at what he does he will walk around the entire car to get an overall view of the body and paint condition of the vehicle, also checking the tires for tread wear. He'll then check the currency of your tags, inspection, registration, he'll inspect the windshield and all the glass for any cracks, chips or blemishes.
He will check the fluids, open all the doors, hood and trunk. He'll look inside the vehicle for cleanliness, he will make sure every button and switch works. If you vehicle has a navigation system, DVD player or CD, he'll make sure they operate correctly.
He'll scan the vehicle identification number (VIN) with his smart phone and check it's history with a company such as AutoCheck Vehicle History Reports to make sure the vehicle comes back clean. Most of these smart phone programs will also tell the current used car market and some average current values on the vehicle he's appraising.
As the appraiser goes through his inspection of your car he's looking for certain "red flags" like paint lines, wrench marks on nuts and bolts, sputtering engine, misaligned carpet, low fluids, etc. If he finds one of these "red flags," he will look a little deeper into the area to see if he can find anything else he can use to devalue the vehicle.
The Appraiser Will Drive Your Car
He will then take your car on a test drive. He will check the odometers operation, engine idle, acceleration, brakes, alignment and the overall handling of your car. Most test drives last 3 to 5 miles or at least one click of the odometer. A good used car appraiser has a set route he takes every trade through. The route may consist of some highway driving, stop and go driving and some rough road areas to test out the shocks.
As the appraiser is inspects your trade-in, he has to decide if your car will be a vehicle to retail on the lot or wholesaled at an auction. Contrary to popular belief, most dealers actually try to "break-even" with wholesale. Good dealers believe, if their making money in wholesale, they're missing new and used car retail sales because they're not giving enough money for trades.
Is Your Trade Classified as Wholesale or Retail?
If the used car manager decides your vehicle will qualify for retail. He must determine what it will cost the dealer to get your vehicle ready and available for sale on the lot. That means he must determine a value for your car and then subtract money for any discrepancies, cracked windshield, torn leather, detail, tires, alignment, etc.
If he decides your trade will be wholesaled or sent to auction, he'll set a value that's just below the current wholesale market value of your car. The reasoning behind the lower value is that way he will make a little money at the auction or when he sells it to a wholesaler.
Most car dealers try to break even or make very little money when it comes to wholesale. If a dealer is making money in the wholesale business they believe they are missing out on retail car sales.
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Appraiser Will Check the Market on Your Trade
After the used car manager has test drove your trade he'll check the current used car market and see what your specific car is bringing on the wholesale market.
He'll refer to large wholesale auto auction companies such as Manheim Auto Auction Reports (MMR). Manheim is the largest auto auction company in the Nation that almost all the dealers use, including myself. You must have a wholesale or dealer's license to access online or attend.
He may also refer to a book like NADA Guide, Kelley Blue Book, or Black Book as secondary choices or if he needs more information to make a good decision.
There are usually 4 columns in each one of the above books; Extra Clean, Clean, Average, or Rough. When an appraiser refers to one of these books such as Black Book (most common). No matter how clean your trade-in is they will use the average or rough column or the columns to the far right for the amounts to value your car.
Appraiser Will Put a Value on Your Trade In.
After determining the value of your trade-in, he will now subtract money for any discrepancies he may have found while appraising your car.
Once the used car manager is done with the appraisal process of your trade-in he will call the new car manager or whomever is working your car deal. He will give that person the Actual Cash Value (ACV) of your trade.
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4) Dealer Presents You the Value of Your Vehicle
After the used car manager calls the manager working your car deal. They will present you with the payments, term, cash down, and ACV of your trade all at once. They may use a "four square" or some other method to present these figures to you. This is how a dealer may attempt to scam you on the ACV of your trade:
Example: The true ACV of your trade is $8,000. The manager working your car deal may start off presenting you a lower number of only $5,000. This is called, "Holding on your Trade."
This is a very old and effective little trick car dealers like to use during the trade negotiating process. It's still commonly practiced in today's car dealerships almost every time a trade is involved. It's your responsibility to negotiate you're way up to the true amount you're vehicle is worth. If you have no idea what your vehicle's worth is before entering this arena with a dealer, you're going to lose.
Insider New Car Buying Tip
Always treat trading in a vehicle as a separate transaction. Agree to the purchase price of the vehicle you're buying first and then negotiate the amount they're offering you for your trade. This will keep them from manipulating numbers and make it easier for you to tell how much they're offering you for your vehicle. Once you receive these two numbers, you can then calculate your trade difference.
$25,000 - Agreed price of the car you're buying
- $9,000 - ACV of your trade
$16,000 - Trade difference
In the example above, the manager is holding $3,000 profit on your trade. If you haven't done any research before getting to this point in the car deal you've put yourself at a serious disadvantage. This is why it's so important to have a good idea of what your vehicle's worth before showing up at a car dealership.
Continue to my section on how to estimate the value of your trade-in here.
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