The gap between what people are getting for trade-in value and what people end up paying for the exact same car always blows my mind. Some of it can be explained by the need to finance the 2nd most expensive purchase made by the average person (the 1st being a home).
However, anyone with a half-decent credit score can get a loan from a bank or credit union. Those loans almost always have a better rate than a dealer will offer on a used car so you not only save thousands on the principal but you'll end up paying hundreds less over the term of the loan.
I just cannot fathom how people can walk on a dealer lot and buy a used car without taking one minute to look up the market value on KBB. There's just no way you wouldn't feel ripped off.
disclaimer, this is just my experience, I don't know that this happens at all dealerships, but I suspect it does
CC, it's actually a little more insidious than that; dealerships have always survived on the asymmetry of information between dealer and buyer. Not to sensationalize, this happens in roughly 30% of sales, (usually by the sales person without actually thinking about it)...
1. A person has seen a car online that they want. They may do the legwork and research the car.
2. The walk into the dealership looking to buy the car. The 1 thing people don't think about (generally) is the financing.
3. They find out that they don't have the credit, income, etc... to actually finance that car.
4. The sales person "places" them on a new car, one that they haven't researched.
5. The buyer gets caught up in the moment, falls in love with a car etc... They buy the car for way more than its worth.
This is why Dealers hate companies like TrueCar. It destroys the asymmetry. It's also why dealerships are getting squeezed; the average deal takes a few hours, in that time, people can use their phones to check the car they're buying.
However, anyone with a half-decent credit score can get a loan from a bank or credit union. Those loans almost always have a better rate than a dealer will offer on a used car so you not only save thousands on the principal but you'll end up paying hundreds less over the term of the loan.
I just cannot fathom how people can walk on a dealer lot and buy a used car without taking one minute to look up the market value on KBB. There's just no way you wouldn't feel ripped off.