The first step when negotiating with a salesperson is determining your trade-in price. This initial step may be the most difficult for you, because selling an old car can be a bit emotional. Buying a car is grueling work. Selling your present car is even harder. In order to get the best price for your trade-in, you must know what it is actually worth to the dealer. He won’t give you more for it than its worth – and he will mostly likely try to give you far less.

First of all, you need to evaluate your car realistically, as a potential buyer would.

Here is a method for determining your car's true value, so that when you try to get maximum money for it, you are reaching for a realistic figure.

Check the Blue Book or the N.A.D.A. Official Used Car Guide (you will find copies of these books at your local library). Then evaluate the worth of the car. Include considerations for mileage and for extra features (or damage). Copy both the base page and the mileage page for your records and calculations. Banks will be glad to give you this information and to show you how to read the figures, so don't be afraid to ask. Tell them you want to buy a car and that you are considering using them for financing. Make certain you use a current reference book, not one that is months or years old.

Here’s a chart to help you in your calculations:

Blue Book base wholesale value $____________________________

Estimated value of options (+ or -) $____________________________

Estimated value of mileage (+ or -) $____________________________

Total wholesale value of car

(base +/- options +/- mileage) $____________________________

Blue Book retail value of car $____________________________

Estimated value of options (+ or -) $____________________________

Estimated value of mileage (+ or -) $____________________________

Total retail value of car

(base +/- options +/- mileage) $____________________________

You may find that different evaluations do not come out the same. This is to be expected, as these evaluations are approximate. The evaluations do not take into account a variety of factors, including condition, color, and whether the car is currently “hot” in the market. Also, the Blue Book does not always reflect the market charges in the value of a vehicle.

Keep in mind that the Blue Book and others try to follow and report the market, not predict it. As a result, there will be differences. Use the Blue Book as a first look at a vehicle’s worth. It is an excellent source for that type research.

You should also read newspapers and keep track of what price people ask for vehicles of this type. Usually the asking price will fall somewhere between low Blue Book (wholesale) and high Blue Book (retails).

Here’s a chart to help you with this pricing:

First newspaper price $____________________________

Second newspaper price $____________________________

Third newspaper price $____________________________

Don’t hesitate to respond to as many ads as you like for cars similar to yours to see what is going on in the market. Gather any and all facts these sellers are willing to share. Most people are so anxious to sell their cars that they will share information easily. If a vehicle does not have an automatic transmission, ask if this has been a barrier in the sale. If the car is fully loaded, ask if that has helped the sale even though it may have raised the price. If the vehicle has sold, ask for the sales price, see how it relates to your vehicle. The prices sellers quote will be useful in determining how high a price you can expect to get from a dealership. If people are selling vehicles on the street that are similar to your trade-in, and they are realizing high prices, maybe you should try selling your car yourself. Street prices do reflect the retail market.

Once you understand the market value of your car, you will then be able to judge what the dealer is offering you. Remember, a dealer will sell to the same retail market and should be able to pay more for your car, since he can sell it for a profit even though he has to fix it up.

Check with several dealers and ask what they want for your type of car. What would they sell or buy it for? Check the market. Is your vehicle sizzling hot or shivering cold, a seller or a sitter? If it is a hot seller, be firm on the price you want from a dealership. If it is not moving, you may to drop quite a bit below Blue Book wholesale to sell it. The chart below will help you organize this aspect of the deal.

Dealer’s purchase price $__________________________

Dealer’s sales price $__________________________

If you have the contacts, see what your car might sell for at a dealers-only auction. See if someone can sell it for you there for a small commission, which may thicken your pocketbook.

The auction price of a vehicle at a dealers-only auction is interesting. If a dealership accepts a car as a trade-in, it may decide it doesn’t want to sell the car from its lot. The reasons may vary and may have nothing to do with the car’s condition. Dealers-only auctions provide a marketplace where vehicles can be bought and sold quickly. The advantage to an auction is the possibility of a quick sale at a reasonable price. Therefore, if a dealership accepts a car for $2,200, it may sell the car at auction for around $2,950 and pocket the $750 (minus expenses). If a dealership can’t get a car below auction price, it may not buy the trade-in, but may buy a similar car at auction and save money.

New car dealerships also “wholesale” their trade-ins to wholesalers who eventually sell them to retailers. So, new car dealerships must buy trade-in's at low prices to be able to resell them. If they pay too much, they must cover this excess by charging too much for the new cars to make up what they lost.

Car dealers will try to mislead you by telling you they can’t even give you Blue Book wholesale price for your trade-in. They may tell you that nowadays everyone gives only auction prices for a used car. They will quote you a much lower price than auction prices.

How can some dealers get away with using this ploy? For a number of reasons:

• Most customers believe their cars much be worth a great deal. When pressed, car owners often surrender the vehicle without a battle, because they don’t what trade-in price is realistic.
• Most people are either embarrassed by negotiating or don’t know how to haggle for a better price. This discomfort is often more unbearable, since the dealer is typically strong-willed, knowledgeable and intimidating. Consumers feel they have only two choices when presented with a deal: take it or leave it. They rarely negotiate for price or conditions.
• Salespeople are experienced negotiators and leave themselves some maneuvering room so they can later raise the price if they have to. For all they know, the customer may simply take the lowball offer or the dealership may not have to raise the offer by much. It is critical to understand that it is not a take-it-or-leave-it situation. The dealer’s offer is just that – an offer. You should always counter with your offer rather than feel pressured to take-it or leave-it.
• Dealerships don’t have a problem financing customers if they make their profit with a low price for the trade-in. Banks set rules about financing. The bank's main concern is not financing a customer as an act of charity, but making sure that if the customer defaults on the loan, the bank can retrieve its investment. How does the bank do this? By loaning less than 100 percent of the car’s value. If the dealership makes its money by selling a car at list or above list price, the bank may be reluctant to lend all that extra profit. If the car has to be repossessed and sold, it will not return enough money to satisfy the bank’s investment.
• Buyers usually purchase their new cars first, and then find out how much their used cars can fetch. By that time, they are so emotionally committed to their new cars, they don’t care as much about getting the best price for their trade-in's. They have devalued their trade-ins in their own minds and therefore won’t fight to get the best value for their old cars. It is best to learn the value of your trade-in first, before negotiating for your new purchase.
• Many people are not able to sell their old cars themselves, so they have no choice but to accept the dealer’s price. This is a tough situation to be in. The customer needs a new car and wants to get rid of his old car (the trade-in). He is not comfortable selling it himself, and for the same reasons is not comfortable negotiating with a dealer for a better trade-in price. What does the customer end up doing? He naturally concedes defeat and hurries to get the trade-in negotiation over with.

Try to get the Blue Book wholesale for your trade-in, but be prepared to settle for something less. If you can get wholesale, good job! If not, never settle for less than auction price. You should always get that.

A respectable price through a dealership would be wholesale minus $300. If you are unable to reach that and feel comfortable doing so, try to sell the car yourself.

One thing to bear in mind is that dealers never give Blue Book price credit for low miles, but they always deduct for high miles. Always fight for every dollar for low miles. Dealers prize low-mileage and clean older cars, and will be willing to pay for them.

Also, it is generally known among used car dealers that for cars older than six years, the mileage in Kelley Blue Book is not realistic. The figures for average miles driven are so low the deductions don’t make sense.

The first rule when handling your trade-in is to agree on your trade-in before you negotiate a new car price. The chart below will help you:

Dealer’s first offer on your used car $__________________________

Dealer’s next offer on your used car $__________________________

Dealer’s best offer on your used car $__________________________

How does it compare to wholesale? $__________________________

Auction? $__________________________

Retail? $__________________________

Since it is so important to get the maximum price for your trade-in, repeating the following points may help in your negotiation:

• Remind the dealer how critical it is that you get the best price for your trade-in and that if the dealer reaches your requested price, the rest of the sale will run easily. Salespeople scrutinize each customer to see what is important to him. If the trade-in price is important, the dealership will give it, if the salesperson feels the rest of the deal will proceed easily. The salesperson needs to feel secure that his necessary profit can be picked up in other areas of the transaction, such as the new car price.
• Tell the salesperson you need a good trade-in price for your car in order to afford a down payment. This is a noteworthy reason, even if it is not relevant in your case. Use it. Many people have profitable jobs yet live to the limit of their incomes. They can make payments of $200, $300, or more but find it tough to come up with, say, $3,600 in cash for a down payment. The best way to raise cash for a down payment is to receive a good price for the trade-in to apply to the down payment, thus keeping the cash portion of the down payment low. Lead the salesperson to believe that this is your situation.
• After you have been promised a good price for your trade-in, you can then stress the importance of other elements of the transaction. When the salesperson attempts to charge a higher price for the new car, stress how significant a fair price on the new car is to the deal. The salesperson is now trapped, having already agreed to a good price on the trade-in. He has already invested a considerable amount of time on you and does not want to risk losing the sale at this point.