We all know that the car buying process is tough. From sorting thru hundreds of different models, trim levels, and features to find the car you want, to finding the best price, to arranging financing…just thinking about the process is enough to overwhelm many consumers.
One of the most dreaded – and poorly understood – parts of this process is figuring out what to do with your existing vehicle. Most consumers are only aware of two choices:
1. Trade-in your existing vehicle to the selling dealer
2. Sell your existing car yourself
Many people dislike the first option because trade-in values are always below market. No matter how much you get the dealer to give you, they’re going to make money off your trade. It feels like a bit of a rip-off.
There are also challenges with the second option. Preparing your existing car for sale takes work, the paperwork requirements can be confusing, and some vehicle owners are understandably concerned about their safety when they list a car for sale on a website like Craigslist. There’s also the fact that taking money from a stranger isn’t foolproof – con artists have been known to use fraudulent checks.
While there are things you can do to get more for your trade or make selling your car easier, there’s also a little-known third option called a “pass-thru” transaction.
What’s A Pass Thru, and Why Should I Bother?
A “pass-thru” transaction is conceptually very simple. First, you list your car for sale just like you would if you were going to sell it yourself. However, when you find a buyer, you don’t sell them the car (at least not directly). Instead, you trade-in your car at the agreed-upon purchase price, and then your dealer turns right around and sells your trade to the buyer you’ve found. Hence the term “pass-thru,” as the car basically passes thru the dealer’s hands.
A pass-thru transaction is a win-win-win transaction because:
1. The dealership wins because they get to charge you a processing/handling fee to take care of your paperwork, and then they get to sell you a new car too (you can’t trade-in a car unless you buy something, right)?
2. You win because you found a way to get market value for your trade-in.
3. Whomever buys your car wins as they get the opportunity to use dealership financing, include accessories in their purchase, etc.
While a pass-thru transaction is more work than a simple trade-in, it’s also more money in your pocket, and you don’t have to worry about doing paperwork, your safety, or getting paid.
If there’s a problem with pass-thru transactions, it’s that some state dealership regulators don’t like them. For sales tax revenue reasons, many states would rather see consumers trade-in vehicles for less than market value, which means that your local dealer might not be willing or able to complete a pass-thru transaction for you.
It never hurts to ask, however.
Author Jason Lancaster is a veteran of the retail automotive industry with nearly a decade of dealership management experience. When Jason isn’t offering consumers automotive advice, he’s helping to promote Anderson Ford Motorsports, a company that specializes in performance parts for Fox-body Mustangs. Check out Anderson’s website here.