How is my trade in value determined by a dealer?

When you bring your car to a dealership for a trade-in, the number they offer isn’t pulled out of thin air. In fact, dealers use a mix of inspection, market data, and profit margins to come up with a value.

Here’s what usually happens during the appraisal:

1. Physical Inspection – An appraiser checks your car’s condition inside and out. Scratches, dents, worn tires, and the state of your brakes all matter. They’ll also take it for a quick test drive to listen for noises and feel how it runs.

2. History Check – Your VIN is run through databases to compare against recent auction sales, Kelley Blue Book, and dealer-specific sales history. Why auctions? Because if they don’t keep your car, they’ll resell it there.

3. Math Behind the Offer – Dealers look at what they could realistically resell your car for. Then they subtract reconditioning costs (repairs, detailing, etc.) plus a margin for profit. The result: your trade-in offer.

Why offers feel lower than “book value”If you’ve ever plugged your car into an online tool like KBB and then gotten a lower offer at the dealership, you’re not alone. Online tools give a ballpark figure, but the dealership needs to factor in their own costs. That’s why trade-in offers usually come in slightly under what you’d expect selling it yourself.

Pro Tip: Before heading to the dealer, get multiple quotes. Services like CarMax, Carvana, or Kelley Blue Book Instant Cash Offer give you an idea of what your car is worth. You can use those quotes as leverage when negotiating.

Bottom line: Your trade-in value comes down to current market prices minus the dealer’s costs and profit margin. A little prep and research can help you walk in with confidence — and maybe even walk out with a better offer.