Why do dealers will offer whole sale – auction value for a trade in?

I tried to trade in my 2005 RX 8 with 15 000 miles on it and they offered me whole sale/auction sale although the car is in a great condition. What can I do to contradict their argument “we can get this at an auction” but the transaction is a trade-in. Please help !

First, as to why we (dealers) offer wholesale for your vehicle. There are several reasons, but the most compelling is because we are in business to make money. It is funny that nobody argues with any other business if they buy at wholesale and sell at retail. But car dealers are the bad guy for doing the same thing. Another reason we pay as little as we can for a trade in, is because no matter what condition the vehicle is in, it is NOT ready for us to resell. We spend an average of $950 per vehicle to get it into condition to sell at retail. Then when it is ready to sell the buyer wants anywhere from $2000 up in discounts before they will buy. You can see that it is easy to loose money on a vehicle that you have less than $3000 mark-up in. I hope that answers the first part of your question.

As to the second part, how to contradict the dealers offer, the best answer is to sell the vehicle to another individual yourself. You always make more money when you are the retailer. In fact, in a lot of cases if you can get someone to just give you what you owe on a 2005 model, you will be better off at the dealership by using the discount and cash incentive as a down payment instead of letting it go towards negative equity. Unless you made a huge down payment on your RX 8, you owe more than it is worth at wholesale. The average buyer owns a car that is financed for 60 months for about 41 months before they are out of negative equity.

I have been a dealer for over 25 years and I understand your dilemma. I hope that I have given you some useful information. – Gary

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