Trading In- Why Pay More?

Dear Miss Mota Mouth,

Why is it that you pay more for a vehicle when you trade something in than when buying it outright? That has NEVER made sense to me!
Misty, MO

Dear Skeptical in Springfield,

Any Motley Fool can tell you that Cash is King!

If you are buying your car outright, it means that you will be handing over the cool stuff that makes a car dealer weep with joy. Sure- they make money on financing and extra services but a simple easy cash transaction will do them just fine, thank you very much.

If you have a trade in and you think that you are paying too much, it is probably because you have an unrealistic expectation of what your old car is actually worth and so in order to keep their dear customer happy, they are letting you think that it is worth that much but actually rolling their loss into the price of the new car.

For example, if your car is worth $2,000 to them and they know they can sell it for $4,000 but you insist that you need $3,000 for your car, they will tack the extra grand on the new car.

It really is that simple and just being realistic about the value of your trade in or, even better, selling it yourself so you get higher than wholesale, can save you quite a chunk of change.

Frankly,

M

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