Think Before Trading in Your Used Car

Research shows that buyers end up paying more for their new car if they brought a vehicle to trade in at a dealership.

Think Before Trading in Your Used Car
Earn more than a trade-in

It’s widely accepted that you can get a better price for your vehicle by selling it in the private party market compared to trading it in at a dealer.

While selling your car privately seems like a hassle – although not with the Instamotor App, you may want to reconsider the “convenience” of trading it in at a dealer based on what researchers at USC Marshall School of Business uncovered.

Losing more on your new purchase

Dealers charge a premium for convenience. It’s widely known that the dealer will offer you below the market price, which means big dollar signs for the dealer – dealers stand to make significant profit off of your used vehicle.

The research shows that buyers end up paying more for their new car if they brought a vehicle to trade in. Researchers theorized that sellers can judge a buyer’s willingness to pay based not only on the fact they’ve decided to trade in their vehicle, but also on the trade-in vehicle’s characteristics. The researchers looked at data from new car transactions in the premium midsize sedan category between 2001 and 2005.

The findings suggest that dealers believe buyers have a higher willingness to pay and that dealers generally hold out for a higher price when a buyer has a trade-in then when they don’t.

Higher prices for same brand purchases

Dealers also command a higher price from consumers who repurchase the same brand of vehicle they are trading in – no rewards for loyalty. For example, if you’re looking to buy a new Toyota and are trading in an old one, you’re probably pretty happy with the brand and not considering a competitive brand so dealers won’t incentivize the purchase.

The results show that consumers with a trade-in pay an average of $990 more than those who don’t trade in a vehicle. On top of this a buyer pays an additional $150 more if the trade-in is of the same make as the new car and another $64 more if it is the same make and model.

Disposing of your vehicle outside of purchasing a new vehicle is the only way to avoid this bias – the Instamotor App takes the hassle out of selling your own vehicle – you can list your vehicle directly from our App from anywhere – even from your couch.

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