You’ve traded in your old model for a brand new ride, but have you ever wondered exactly happens to your trade-in?  I know I have and in some instances, I’ve even felt a little guilty for letting the old car go in order to trade up.

Generally, here’s what happens:

The dealer will either prepare the vehicle for the retail market or sell it wholesale, with either decision resting on a few factors, such as the condition of the vehicle, how many miles are on the odometer, any estimates for repair and how many similar vehicles they already have on the lot.

Once any repairs to the vehicle have been made, the dealer is then committed to the sale and usually must sell within 60 days – or as they say in the car business, convert the car to cash.  If the car will be sold at wholesale, the dealer will make an appointment with a wholesaler to visit the showroom or send the vehicle on over to an area auction.

A used vehicle is worth it’s conversion into cash on the day it’s sold.  The actual cash value, otherwise known as ACV, is the true value of the vehicle. A dealer will note wholesale guide publications, black books, and auction sheets.  A typical auction runs as many as 8,000 cars at once and sets the tone for the industry.  If the auction is strong, it means the dealer needs inventory and thus, buyers are bidding up the cars.  On the other hand if the market is soft, nobody is bidding and the vehicles will run again the following week.  When nobody is bidding, it means everyone wants to sell simply because they have an overstock of used inventory, so the price of a trade-in will go down.

The used car market is volatile and because it changes from week to week, some vehicles will be more affected than others, depending solely on supply and demand. For example, smaller cars with good gas mileage are selling like hot cakes right now.  As a matter of fact, I went car shopping the other day and trying to find a nice used Toyota or Honda is next to impossible right now – shoppers are either snapping them up or hanging on to the ones they already own and it’s no secret why; getting good gas mileage is paramount these days. If dealers buy these types of vehicles at auction, chances are it’s because they know these particular vehicles will sell fast, allowing them quick sales and a nice profit.

Hilary recalls that when she was in the used Porsche business, she and her colleagues would refer to the end of October as being, ”Last Call,” which meant prices could drop as much as $4,000 in a period of a single week, while in March, the market would bounce back.  She says if she were appraising a car in October, they would make certain to cover themselves for the winter market, with winter months bringing in more for a four-wheel drive vehicle than a convertible or sports car.

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