Trade-In Allowance
Trade-in allowance is the dollar amount a dealership credits toward a new purchase for a customer's existing vehicle. Learn how over-allowance affects front-end gross.
The dollar amount a dealership credits toward a new purchase for a customer's existing vehicle. Trade-in allowance may differ from actual cash value (ACV) — the difference is effectively a hidden discount. Over-allowance occurs when the trade-in credit exceeds ACV, transferring margin from the front-end deal to the trade-in line item. Because over-allowances shift profit between line items without changing the customer's out-of-pocket cost, they are one of the hardest forms of margin leakage to detect. DealerInt tracks trade-in over-allowances as a form of pricing override, flagging the delta between ACV and credited allowance in real time so managers and GMs can see exactly where front-end gross is being given away.
Category: Finance
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