trade-in allowance is the amount of money taken off the sale price in exchange for the item being traded in by the customer. It is most commonly seen in the automotive industry when a person trades in their old car to the dealer. The term "trade-in allowance" is used because it is different than the actual value of the item. For example, the new car has a retail price of $20,000, but the dealer would be willing to discount the vehicle and sell it for $19,000 cash. The old car has a wholesale value to the dealer of $8,000; but the dealer would offer a trade-in allowance of $9,000 off the full retail price of the new car. The difference between full retail and the trade-in allowance ($11,000) is the same as the difference between what the dealer is willing to take for the new car and what he is willing to pay for the trade-in (19 - 8 = 11).
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