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Buying and Selling Tips

Why is there such a big gap between trade-in and retail value?

Lets walk through an example to understand the difference between retail and trade-in values. If you look up a 1999 Yamaha R6 motorcycle on this site the Blue Book estimated RETAIL value is $5,390 while the estimated TRADE-IN value is only $3,200!

Where did the other $2,190 go? There is no short answer?please keep reading.

Most consumers think it is a dealer's obligation to take trade-ins. In reality dealers often take trades, even though they would rather not. When a dealer takes your unit in trade they are in essence "buying your vehicle". The length of time they have money tied up with your vehicle has a strong bearing on the profit picture.

Now let's take a look at what the dealer does once they take a "trade-in"

1) A lien search must be done to ensure no money is owing on the machine.
2) Most provinces require an accident disclosure be made to future customers so a search is also performed for past damage history.
3) Most vehicles are inspected and repaired in their service shop so they may be certified for future owners.
4) If the vehicle is deemed worthy, the unit is then detailed by the dealer.
5) Now the dealership must push the bike in and out of the shop every day and wash the dust off the unit weekly to keep it looking good.
6) The dealer must employ a salesman to sell the vehicle.
7) Most customers want to take the vehicle for a test drive so the dealer must provide a dealer plate that fully insures the vehicle for damage and the customer for physical liability.
8) The customer makes an offer and the salesman takes the offer to the sales manager for approval. The sales manager says yes or no based on market conditions. Hopefully the unit is sold for a profit, but some times it is sold for a loss.
9) Dealers must be profitable. If they are not profitable they are forced out of business and we lose all our conveniences of having a local dealer.

With the recent price reductions from the manufacturers on most new vehicles, used vehicles have dropped in value significantly. Dealers have had to sell trade-in at less money than they originally paid for them.

The private buyer, however, is less concerned with profit margin. They are purchasing a vehicle for personal use, not to markup and resell. They don?t have to cover all of the transaction costs that a dealer does. They are therefore willing to pay a higher price for the vehicle.

So, why then would anyone in their right mind trade-in a vehicle to a dealer if they could sell it for thousands more to a private buyer? Short answer, selling privately can be a pain in the butt!


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