[bryanlarsen]

1: Dealers cost ~$2800 more on average, but they may also provide $2800 of value to some people. For instance, many dealers add a 6 month warranty, clean up the car. More importantly, buying from an affiliated dealer can be seen as safer because too many complaints can cause the dealer to lose their affiliation.

2: I was the impression that the standard scam for trade-ins was to inflate the trade-in value. It makes a customer feel better if they get $500 more for their trade-in than if they get $500 off the price of the new car even though it works out the same.

3: Buying luxury later does not necessarily save money. Some brands depreciate more than others. Toyota & Honda depreciate the least, but BMW is pretty close.

[tptacek]

You can't go to a car dealer and get an "inflated" price for your current car without buying a new car from them; they're getting their $500 one way or the other. It's a bad idea to sell cars to dealers. Their entire profession revolves around capturing the spread between car buyers and sellers.

Also, a BMW 3-series depreciates ~$7,000 in the first 2 years; a Toyota Camry depreciates ~$3,500. Those numbers aren't pretty close.

[bryanlarsen]

From what I understand, a car dealer makes the bulk of its profit from its maintenance department. Most of the time they make very little profit from your used car, it's usually just resold to a wholesaler. The dealer is usually only interested in reselling relatively new cars of the same make. The biggest reason they take trade-ins is because it makes it easier to make a sale and it makes it easier to play with the numbers.

So yes, you shouldn't sell to a dealer, but if you don't know why you can be conned when you're surprised by how much they actually offer for your trade-in.

A BMW 3-series costs about twice as much new as a Camry, so that seems like equivalent depreciation to me.

[sixQuarks]

Used cars are actually a huge profit center for dealers. They will wholesale older cars that they can't sell on their lots, but for a good late-model used car, they can easily make a few thousand dollars profit.

[sliverstorm]

I don't know if anything is a huge profit center for dealers these days.

I mean, they will certainly have big revenue centers, but their business model is like a snake's eating habits- big meals occasionally.

[stouset]

Sorry, but bleeding out $7,000 a year instead of $3,500 a year is still an extra $3,500 a year, regardless of how much you paid for the damn thing.

[sliverstorm]

Are you arguing that dollar value of depreciation is more important than rate?

[stouset]

When comparing two alternatives? Absolutely.

Let me ask you: would you rather have owned one share of ENE (Enron) before the collapse, or ten thousand shares of MSFT in 1999?

[larrys]

"It's a bad idea to sell cars to dealers. Their entire profession revolves around capturing the spread between car buyers and sellers."

Well a few things. It depends on the car and the value of the trade and how much time you have.. They do provide a service (they find a buyer) which can be quite helpful if you don't want to have to deal with strangers coming to your home or office to test drive the vehicle as well as other things that need to be done to facilitate the transaction.

There is also the issue of state sales tax. If you trade a car in of $20,000 trade in value you are saving sales tax in a state that charges that. So in NJ for example by trading the car to the dealer you save 7% of 20,000 or $1400 right there. Now of course you can also do what is known as a courtesy trade running the paperwork through the dealer if you have a buyer all lined up ready to go. That's not easy to do though. A dealer can smell when you need to complete a sale. I've done this exactly once in the past. The other times it wasn't possible to coordinate the two sales.

Of course a dealer makes money and can plays games with your trade. But you provide a service and charge for what you do as well.

[TylerE]

You say that like it's a necessarily bad thing. Remember the post recently about the guy who was doing exploiting exactly that spread on Craigslist?

[dionidium]

It's a "bad" thing if your desired outcome is to get the highest price for your car at the cost of some convenience.

[gcb]

a 3 series may cost twice a camry

[tptacek]

2/3rds as much.

[TylerE]

Re point 3: Also don't forget that while the value of these cars may depreciate to daily driver levels, the maintenance costs don't. Speaking from semi-painful experience as the owner of a '96 Lexus with 160k on the clock.