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Dealers Paying More Money for Trade-Ins Right Now

February 24, 2011

Trade in Prices2 out of 3 new car buyers have a trade-in, and if you're one of them, you're in luck.

Trade-ins are commanding higher prices, according to a recent study by the National Automobile Dealers Association.

They're in demand due to a shortage of used cars.

NADA expects a 4% drop in used-car supplies throughout 2011, leading to a 5% to 10% price increase in used-car auction prices, which is one of the primary methods for car dealerships to acquire used vehicles.

When dealers can't get their vehicles at auction, they look elsewhere - namely trade-ins.

A lot of the price increases are due to pent-up demand.

With the economy improving, people are more able and willing to replace their old clunkers with a new car. GM and Chrysler have seen residual value gains of 15% to 20% for 2 to 5-year-old models, according to NADA.

Used Japanese, German and Korean brands have seen 10% price increases.

If you have a lease that ends soon, you can also take advantage of the situation by comparing your end-of-lease buyout price with the market price of the vehicle.

Some people are reporting price differences of several thousand dollars. It's certainly worth looking into.

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My Recommendation for Car Shoppers

TrueCar No-Haggle, Edmunds Price Promise, and 1-800 Car Show are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.

California Residents - Important:

There is a new online car buying service called Roadster, available only to California residents, which I highly recommend you try - especially if you hate the stress of haggling with a car salesman. They provide an expert concierge who negotiates the price of the car and delivers it to your home with zero hassle - you never have to interact with a dealership. Here is my in-depth review of Roadster and why I recommend it.

- Gregg Fidan

Gregg Fidan

About: Gregg Fidan

Gregg Fidan + is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.

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