I saw a dealer ad that said, "If we make a deal, we'll pay off your trade, no matter what you owe on it." I have a vehicle with a trade-in value of $4,000 but I owe $6,000 on it. The new car I want to buy has a $500 rebate. How can they afford to pay-off my vehicle when I owe more than it's worth?
In order to pay off the $6,000 loan for a car that is only worth $4,000, the dealership has to come up with the extra $2,000. The $500 rebate helps -- but the other $1,500 has to come from somewhere else. And the most likely place they'll find this extra money is in the profit of the new car you are buying.
In other words, they need to make at least a $1,500 profit from the sale of your new car to gain that extra money. Of course, you may never know this since they can hide the $1,500 profit in several ways -- including putting it into the cost of your financing, extended warranty or other extras.
The bottom line is that, somehow, you will be one who ends up paying the extra $2,000 (or at least most of it).
Best Advice: Don't trade-in your old car. Sell it on your own. You'll get much more money for it and you'll avoid the dealership's trade-in games.
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