Why a trade-in is hard to price
When one business is both buying your car and selling you another, there is only one number that matters to them: the changeover. They can move the trade-in figure up and the discount down, and your contract total does not change. This is not dishonest, it is simply how a bundled deal works, and it means the trade-in figure on its own tells you very little.
How to compare them properly
Separate the two transactions before you negotiate:
- Get independent written offers on your current car first. Now you have a real market number.
- Negotiate the new car on its own, as a cash purchase with no trade-in mentioned. Get that price in writing.
- Then introduce the trade-in. If the dealer's trade figure beats your independent offers, take it. If it does not, sell separately and pay cash.
Do it in that order and you can see both numbers clearly. Do it in the other order and you are negotiating in the dark.
The stamp duty point
In some states, trading in can reduce the stamp duty payable because duty is calculated on the changeover amount rather than the full purchase price. Whether that applies, and how much it saves, depends on your state and the values involved. Ask the dealer to show you the duty calculation both ways so you can factor it into the comparison rather than guessing.
When a trade-in genuinely wins
- The dealer's trade figure beats your best independent offer, which does happen when they are short of that exact stock
- The stamp duty saving closes a small gap
- You need a car every day and cannot manage a window without one
- The convenience of one transaction is worth a known amount to you, and the gap is less than that
The point is not that trade-ins are bad. It is that you should only accept one after you have seen what the alternative was worth.