"Say I give $30,000 for a vehicle trade-in that costs $33,000 new," Gilbert says. "If the manufacturer is giving $6,000 (in incentives), then our new car department could sell the new car for $27,000. That's less than I can sell the trade-in for."
It ultimately means that the trade-in value would be worth much less to him, despite the fact that it's a newer car.
Separate the trade-in and new car transactions There are many variables involved in purchasing a new (or new-to-you) car, including the finance rate, new car price and down payment amount.
Make sure the price you get for your trade isn't affected by any of them.
"If you feel strongly that you want a higher trade-in value than what the dealer initially offered, the dealer may give you your victory and tell you they'll give you what you're asking for," says Painter.
However, that dealer could also take advantage by boosting one of the other variables to make up the difference.
One way to keep trade negotiations separate from financing negotiations is to consider getting your auto loan from another bank or credit union.
"Check all your other options before asking the dealer about financing," Glover says.
Know your credit score and understand the going rates for car loans. Ultimately, you may still choose dealer financing. But proper preparation gives you a better idea of the best option for your situation.
If you are upside down in your current car -- meaning you owe more than it's worth -- dealers may try to accept your negative equity and apply it to your new car loan.
Instead of falling into that debt trap, consider temporarily putting the brakes on the entire car-search process.
"Hang on to your old car longer and pay down as much of its loan balance as you can," says Glover.
Don't tie yourself to one dealer Remember, you are not obligated to buy a car from the first dealer you meet.
"If you and the dealer can't agree on the price for your trade in, just walk away," Painter says. "You are not obligated to accept the dealer's price, and because you would have done your homework, you'll know immediately if they've given you a fair or unfair offer."
Nerad agrees that trying multiple car lots can pay off.
"Take your car to three same-make dealers and ask them to make the same an offer," Nerad says. "That way, you'll get a feel for the market."
Another reason to look at multiple dealers is because other cars on individual car lots can affect your trade-in price.
"My inventory may be different from a dealership down the street," says Gilbert.
For example, he notes that he may have just sold a car like the one a consumer is trading in, but another dealer may have a similar car that's been sitting out on their lot for a month.
In that case, the other dealer probably wouldn't give top dollar for the consumer's trade. If you aren't happy with what dealers are offering for your vehicle (particularly if you have one with a V-8 engine), consider finding that final buyer yourself on the retail market.
"There is the potential that you can sell it for more to a private party, but you also have to deal with the non-convenience factor, and that is certainly worth something of value to consumers," Nerad says. "A lot of people feel uncomfortable with strangers coming into their home (to inspect the vehicle)."
However, it's still an option to remember if you find that you are frustrated with the trade-in prices.