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Any effective strategy is to buy something that has more value than what you paid for it. So for example if the car you buy is a $1000.00 and its worth $1500.00 then obviously you made a $500.00 profit if the dealer gives you $1,500.00 or if you sell it.
Here are the pitfalls of this plan, is cheap car in good condition? Does it have any mechanical issues? If it does you might just end up in a money pit. So more issues happen and can cost you more than what the car is worth. With parts and labor, fixing the vehicle may be more of a headache than actually keeping it or purchasing it.
Also if the dealer doesn’t want to give you what you are looking for that also is a issue. The reason why the dealer may not give you what you are looking for is because there is not a huge mark up and there is not enough profit in the deal for the dealer to have a reason to sell the car.
The dealership will give only the wholesale value, so try to do your research before you capitalize on your plan to get more down payment on the new vehicle you are trying to purchase. Sometimes you might be able to work the deal so you may not have to trade the vehicle. You can donate the vehicle and get a tax credit, so when you file your income tax it can help towards your refund.
Another tip is if the vehicle has a salvage or flood title than it is worth way less than the normal value, so be careful of purchasing a vehicle like that as well.
You can check sites that can give you a value of what your car is worth before you trade, this way you have an idea before you get insulted with a extremely low number.