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What Does the Dealership Do With My Traded-In Car?

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trade in car to dealership

What happens after you hand over the keys to your old car?

You’ve finally picked out the new car you’ve wanted and are signing the papers at the dealership to trade in your current car for this newer vehicle you’ve been eyeing. Once you get that money for your trade-in and hand over the keys, you bid farewell to “Old Faithful” as it’s driven out of sight behind the building by one of the dealership employees.

For most of us, trading in our car–which we’ve called by a personal name for years–is a bittersweet experience. We need a new car and it’s helpful to get some extra money toward that new car via trade-in value, but in our hearts we hope that our old car is treated well and finds its way to another loving home.

But what actually happens to your car once you hand it over to the dealership? Let’s pull back the curtain and see the fate of your beloved first car.

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Discovering the Fate of Your Traded-In Car

What the dealership does with your trade-in depends a lot on its age and condition.

Dealerships actually make a decent amount of profit on trade-ins that are reconditioned and sold on their lot since they don’t have to pay an invoice cost to the OEM. Typically, the vehicle has to have under 75,000 miles and 5 years on its record to be considered for resale, though some small “mom and pop” used lots might take it if it’s older. If your trade-in fits these conditions and is a model that’s attractive enough to attract buyers (especially if it’s a brand the dealership carries), then your old car will get cleaned up and priced at 15-20% higher than its value.

If the car you’re selling is a recent year without much wear, it might even qualify for Certified Pre-Owned status, which would make the dealership even more profit since it can seller it at near-new prices.

But if you’ve traded in that ten-year-old sedan you drove in college that makes unnatural noises, the sad truth is that it’s not getting sold. Cars that no one else will want to buy or that will cost dealerships a lot of money to fix/refurbish will be sent to auction to make the dealership a couple hundred dollars. Once  dealership pockets that money, the car will be used for scrap parts.

If you’re only going to receive a couple hundred dollars in trade-in benefit for your used car, it may be best to save the car and sell it yourself privately or offer it to someone who could use it. Just keep in mind that most donations to charities also result in auctions for scrap value.

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Source: Real Car Tips