What is the Difference Between ACV and Trade Allowance on a Used Car?

You might have already guessed that the Actual Cash Value (ACV) of your used car and the Trade Allowance on your used car are two entirely different numbers.

When you are trading a car into a dealer, they are going to ask you for your keys so that they can appraise your car. At that point, the used car manager will take your car around the block and do an inspection to see if it has been involved in an accident, had any paint work, needs any engine work, how the brakes/tires are, etc. The used car manager will have an appraisal sheet listing the year, make, model, VIN number and mileage on the car and he will do a little research on the computer, possibly call a few wholesalers and put his number on the appraisal sheet. The number that the used car manager puts on this sheet is the ACV. This is the number that you want to see because this is what your car is really worth.

When negotiating a car deal, very infrequently will the dealer list on the worksheet what the ACV is on your trade. He will usually either write trade in value or trade in allowance. A lot of times dealers will try to "hold" $500-$1,000 of your trade in's value. For example, if the used car manager lists your car with a $5,000 ACV, as you are negotiating on the worksheet, your trade in will be listed as $3,000-$4,000. If you agree to take $3,000 for your trade in, the dealership is making an additional $2,000 worth of profit because they probably have a wholesaler who has agreed to buy the trade in for $5,000. The way to avoid this happening to you is to first off, act like you are a cash buyer, that you don't have a trade in, negotiate the price of the new car you want to buy. Once you have an agreement on the new car and a price that you can live with, that's when you tell the dealer, "Oh, by the way, I also have this trade in." Since you already have an agreement on the price of the new car, there is no way the dealer can play with the numbers on the new car. After the appraisal is finished on your trade in and they show you the trade in value or trade in allowance, tell the sales manager that you want to see the appraisal form because you want to know what the ACV on your car is. When you use the term ACV, the dealer is going to know that you know a little about the car business. If the dealer is unwilling to show you what the ACV is in writing, he is definitely holding some money on your trade in. If he does show you, in writing, what it is, at least you will know exactly what the dealer is giving you for your trade in.

The only way to find out what the ACV of your used car is, is to ask the sales manager to see the original appraisal sheet. A way to avoid all of this confusion is to take your trade in by itself to three or four different dealers and have them all appraise your car. Tell them that you are just selling this car, you are not replacing it with a new one. If you do this, there is no way they can hide money. After having gone to three or four dealers, you can then go back to the dealer that offered the most money for your trade in and negotiate the new car price with that same dealer. Once the negotiation on the new car is done, at that point, pull the trade into the deal and say, "Okay, yesterday, you said you would buy my car for this. If you are still willing to do that, we have a deal."

To learn more about trading in your used car, visit Edmunds.com and read through the special reports.