How do RV dealers determine trade-in value?

In this blog post, we will answer the following question: How do RV dealers determine trade-in value? We will also explain what trade-in your RV means and discuss whether it is better to sell it privately instead.  

How do RV dealers determine trade-in value?

The way RV dealers determine trade-in value is by looking up your vehicle model on the Dealer NADA RV price book. NADA will give your dealer the trade-in value and the retail value. Whether there is a markup added to that price, it will depend on the dealer!

Trade-in value is the dollar amount a dealership offers you for your old RV, when you shop for a new RV. There are many factors that can affect the value of your trade-in, including:

• your location, 
• mileage, 
• damage and accident history, 
• and the cost of reconditioning your RV for resale.

How accurate are NADA values?

NADA RV values are considered as accurate and as reliable as they can get. In fact, many RV dealers are using the NADA guide to establish the price but also how much below MSRP they can charge you.  

NADA stands for National Automobile Dealers Association and it incorporates thousands of dealers across the US. If you are thinking of getting a new RV and need to know how much money you are going to trade on your old RV, you can use the NADA appraisal tool to assess the value of your vehicle.

What is the dealer markup on RVs?

The dealer markup on RVs is usually between 20% and 40%, depending on whether the RV is brand new or second-hand, but also on your negotiating skills. 

Many sellers earn commissions of 20% to 30% of the profit on an RV, although this amount varies by dealership and area. The profit on a new RV is not substantial due to negotiations and a buyer’s ability to review the manufacturer’s suggested retail price and invoice amounts online. 

How do dealers hide negative equity?

Trying to hide negative equity is a form of auto fraud. The dealer can indicate on the purchase contract that the amount of the gain is the same as the trade-in value, but then increases the purchase price to cover negative equity.

Do dealers make big money with RV trade-ins?

Well, you might be surprised to know that dealerships actually make very little profit from selling a new car. Their profits usually come from the sale of add-ons and vehicle trades.

Interestingly, a dealership makes more profit from selling a used RV than it does from selling new models!

Most dealerships do not make the bulk of their profits from the sale of a new vehicle. The big profit usually comes from arranging auto loans, selling add-ons, and making money on your trade-in. Dealers can easily make a profit of $ 3,000 just through financing. 

How much below MSRP should I pay for an RV?

You should expect a maximum of 25% below MSRP for an RV. This is a happy case, however, as many dealers hesitate to offer too much of a discount, especially for new and luxurious RVs. It will all come to your negotiation abilities.

When you start negotiating, start working from your strengths:

• Your initial offer, based on what the dealer paid for the vehicle or what you’ve seen to be a fair price.

• Competitive offers from other local dealerships or RV-buying websites.

The seller will likely begin the discussion by focusing on the vehicle manufacturer’s suggested retail price or the monthly fee. Don’t go that way. If the seller starts at price, be sure to negotiate from the lowest price and work up from there, not down from the manufacturer’s suggested retail price (called the MSRP).

If you start with the monthly fee, the seller can pile up the entire process, which includes the price for the new vehicle, the trade-in value (of your old car), and financing, if applicable. This gives you plenty of room for confusion.

Instead, insist on negotiating one thing at a time. Your top priority is to agree on the lowest price you can get for the new vehicle. Only after you’ve made sure of that can you start discussing the value of the trade-in or financing, if necessary.

Too many people tend to only consider the selling price of the vehicle or the amount of the monthly payment. They want to be reasonable and buy something small, especially if it’s a first-time RV.

The purchase price is unfortunately not the most important factor. What really matters is the cost of ownership, which is the difference between the amount paid on acquisition and the price obtained on resale, a few years later. This includes the cost of maintaining and/or repairing the RV during the period of use.

Some RVs seem to offer a lot for the price. But be careful, it’s almost always because they are built with inferior materials. For this type of trailer, devaluation is very rapid. And they often have problems, even in the early years: water infiltration, saggy mattresses and cushions, warped walls, cupboards and doors that no longer close, etc. For almost the same cost of ownership, you could enjoy a higher quality, more luxurious and comfortable vehicle.

Should you trade-in your RV or sell it yourself? 

First, you must understand the difference between a trade-in and a private sale.

To begin with, you should know that the amount obtained from the dealer is less than the market value of our vehicle simply because someone will have to resell the RVafterwards. Whether it is the dealership itself or a used vehicle retailer who agrees to purchase your current RV, there will be a profit made with the subsequent sale.

It might sound logical, but any sales rep will tell you that many buyers do not understand this reality. We often get the impression that the dealership is trying to get us when they tell us the trade-in value, but ultimately what they are telling us is if your vehicle is worth $ 10,000 in the used market and what ‘He gives you a check for $ 7,500, he will make a profit of $ 2,500 on the sale of your current RV.

That said, that profit margin will be eaten away by all the repairs and preparations that will need to be done in order to get your vehicle ready for sale. That little scratch or creaky leather on your seats might not be that bad in the eyes of the owner, but for the seller, these flaws should be corrected before putting the vehicle up for sale.

Then, the valuation of the trade-in vehicle is quite sketchy. The mechanical condition is rarely taken into account and the dealer must protect himself against breakages or problems which will be known only after the conclusion of the sale.

In short, the exchange value is less than the market value for all of the reasons listed above.

Next, you have to consider the taxes. So, do you have an interest in selling the vehicle on your own? Not necessarily. For starters, there are costs that you have to bear. We must have our vehicle inspected, cleaned, correct aesthetic and mechanical problems and announce it.

Then you have to be patient and generally, we will have to meet several potential buyers of varying seriousness and respond to several more or less relevant requests – not to mention the many fraudsters – before finally selling the RV.

However, avoiding these inconveniences is perhaps sufficient to justify the difference between the amounts obtained. It should also be noted that the trade-in value is applied before taxes which are added to the cost of your next vehicle, while the amount you get for your current vehicle will be considered as a cash rebate upon purchase and will therefore be applied after-tax calculation.

Let’s explain this with an example. Imagine that you could get $ 5,000 from an individual by selling the vehicle on the used market while the dealership offers you $ 3,000. Next, imagine that the vehicle you want to buy costs $ 20,000.

Let’s put aside all the costs to make our life easier. Adding taxes to the vehicle charge of $ 20,000 yields a final price of $ 22,995. On the other hand, if we give our vehicle back in exchange, we calculate the taxes on $ 17,000 and the final price is then $ 19,545. If we sell our vehicle and give the $ 5,000 to the dealership, the final price of our next RV is $ 17,995.

Yes, it is always more advantageous from a strictly financial point of view to sell on your own, but in our previous example, you can leave the dealership with your new RV today if you trade-in your vehicle.

If you decide to sell to an individual, you don’t know how long you will have to wait before selling, and how often you will be disturbed on a Sunday afternoon by a curious buyer who wants to see your RV!

Conclusions

In closing, and knowing that the dealership will be making an extra profit on your trade-in, don’t hesitate to negotiate.

Here are the basics to negotiate a price reduction:

1. Carry out a preliminary market study. 
2. Do not give too much information on the first visit. 
3. Make a reasonable offer on the RV. 
4. Have another purchase option.
5. Be clear if the RV is what you are looking for at a reasonable price.

That being said, please feel free to contact us if you have any questions about the process of trading-in your RV!

FAQ on How do RV dealers determine trade-in value?

How does an RV dealership actually make their money?

It all depends on whether it is a new or used vehicle, whether it is a franchise of new RVs like Hymer or Forest River, whether they sell to the government or one of its departments or even at large companies, they can earn as little as $ 10 gross per vehicle, because the dealership will have a sales and service agreement with the factory, to sell a certain target.

How to request a price reduction?

Requesting a discount requires three important elements: planning, information and clarity of the objective.

What is the price of a motorhome?

The cost for the motorhome amounts to about US $ 55,000, which can rise to the US $ 70,000 if higher level and quality equipment are added, such as a special refrigerator, electric awnings, digital television, and premium audio equipment.

References

• Using an RV value guide: Tips on reselling or trading your RV
• How to Prepare your RV for Trade-In | Bucars RV Dealers
• NADA Values | Used Car Values | Car Book Values