Accepting a trade-in vehicle with mechanical problems is the decision of the dealer you want to trade with. Many dealers do business with wholesalers, who can purchase your vehicle and resell it later, so the dealer is not stuck with your vehicle if it needs expensive repairs. Expect a price deduction for your trade-in value if your car needs repairs.
Trade-in Value
Expect a lower trade-in value than appraisal guides suggest if your car needs repairs. Before you accept a value for your trade-in, check the car's value at Edmunds.com or the NADA Guides and Kelley Blue Book website. Choose the proper condition for your vehicle to gauge appropriate values, then deduct the costs of necessary repairs to determine your car's trade-in value. Dealerships must follow state laws when selling a vehicle, making them liable for vehicle issues that aren't corrected before resale. Unless the vehicle is being sold to a wholesaler, expect the dealer to decrease your trade value to cover the costs of necessary repairs.
Appraisal Process
Expect to answer questions about the history of your car and to allow a dealer representative to drive the vehicle. The vehicle appraiser will also check over the vehicle's body to determine if previous body work exists and may run a vehicle history report. Be honest with your salesperson when he asks questions. If the dealership does not ask any questions at all, you do not have to explain the vehicle's mechanical problems. Dealers employ knowledgeable people who identify vehicle mechanical issues and determine resale values.
Wholesale Vehicles
If the dealership you're purchasing from doesn't intend to resell your vehicle on its lot, the dealer can sell the car to a wholesaler. Wholesale vehicles warrant less trade-in value than vehicles that can be sold for retail value on a dealer's lot. A wholesaler, who works with many dealerships, purchases vehicles to resell at auction or to another dealer. For this reason, your mechanical problems may not matter. As long as the vehicle is running, a wholesaler may offer up to $1,000 for an older or high-mileage vehicle.
Trade Benefits
Even though your vehicle's value will be reduced to reflect the price of necessary repairs, you may benefit from trading the car rather than trying to sell it or repair it on your own. The amount that the dealer charges for repairs are cheaper, as you won't have to pay retail value for parts or labor. A dealer can use its own service department for cheaper labor and usually purchases parts at cost or with minimal markup from a retailer. Also, many states offer a tax savings when a trade-in is involved with a purchase. If so, your trade value will be deducted from your car's purchase price before sales tax is applied.
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