Question

If you are considering trading in a used car on your new one, it is best to

A) tell the dealer right away so he can figure your trade-in credit against the purchase of your new car.
B) not trade the car in, but rather sell it yourself to someone else.
C) make the trade-in deal a separate transaction for the new car deal.
D) not be too concerned about the value given, since dealers are required to give you at least blue book value.

Answer 1

Marvin should separate the trade-in and new car transactions, understand that prices often reflect a dealer's reputation, and weigh the risk of additional repairs against the initial cost savings.

Step-by-step explanation:

When considering trading in a used car while purchasing a new one, Marvin should opt for making the trade-in deal a separate transaction from the new car deal. He needs to understand that prices reflect information, even with imperfect information. Dealership lots with a trustworthy reputation might offer used cars at a higher price because they usually fix non-obvious problems to maintain their reliability and reputation. Meanwhile, less reputable lots may offer cheaper prices, but with a higher risk for the buyer. Marvin must assess his willingness to risk potential future repairs against the savings he might enjoy initially. Selling a car privately, such as on Craigslist, might fetch a higher sale price than trade-in offers, but also involves more effort and risks given no dealer reputation to lean on.