When you purchase a new or used vehicle, as many as 3 separate, but related, transactions occur:
Step 1 - Vehicle Purchase
When you have selected the vehicle that is right for you, make sure you receive a "Buyers Agreement," signed by a Manager of the dealership, that states in writing the "Delivered Price" of that vehicle. The "Delivered Price" is the amount you would write a check to the dealership for full payment of the selected vehicle. This should include any documentation (doc) fees, shipping charges, and after market items you have selected. This price should not change if you choose to trade in a vehicle or elect to finance the vehicle through the dealership.
Step 2 - Trade-In
At many dealerships, your vehicle is appraised and you are provided with a "Trade-In" value. This may or may not be the Real Cash Value (the amount they are actually paying you for your vehicle). Often a dealer will show a customer more than they are actually paying for their trade-in (over allowance) by inflating the price of the vehicle that the customer is interested in purchasing. Ask the dealership if they are willing to buy your vehicle at the offered trade-in value, even if you don't buy a vehicle from them. Ask them if they will allow you that same trade-in value on any vehicle on their lot, such as a $1000 vehicle! If they say no to either or both of these questions, they are showing you an over allowance, not the actual price they are paying you for your trade. Over allowances happen every day to many prospective buyers at many different dealerships.
Always remember when trading a vehicle, the TRADE DIFFERENCE (Dealer Asking Price - Trade-in Value = Trade Difference) is the real cost of purchase. If another dealership is showing you more for your trade-in, but still has a higher Trade Difference on a comparable vehicle, you are PAYING TOO MUCH!
Step 3 - Payment\Funding
Only agree to a payment if a "Delivered Price" or a "Delivered Trade-In Difference Price" is agreed upon and a Buyers Order including this information is provided and signed by a Manager of the Dealership. This price should remain the same, whether you pay Cash or elect to Finance the purchase at the dealership. Ask about the interest rate quoted in the payment. This rate should not change even if you elect protection options such as a service contract or gap insurance. If you aren't comfortable with the quoted interest rate, contact your personal bank or credit union to determine their best rate. Your interest rate is determined by your credit rating, the amount financed relative to the vehicle's value, age and mileage, along with the length of the proposed loan!