The first way a dealer can make money on a trade in is obviously to clean the car, send it through the service department to assure it is sellable and then throw the car on it's used car lot and try to resell it for a profit. If your car is new enough and in good enough condition, this is what the dealer will do in almost every case. However, there is another way that a dealer will make money on your trade in if it is a car that they do not want to sell.

Dealers have several relationships with wholesalers. A wholesaler is a person who buys cars on a wholesale level then turns them for a small profit to other dealers. Their profit is usually $500-$1,000 a car. If your car is something that a dealership does not want to resell, he will call a wholesaler, sometimes more than one, get different bids on your car and then flip your car to the wholesaler. The dealer a lot of times will add $200-$500 to the price they gave you when selling it to a wholesaler. You really can't control what the dealer will make on your trade in because if they convince a wholesaler to buy it for $500 more than what they originally gave you, that $500 goes into the dealer's pocket.

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