Under-Allowance

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Under-Allowance

In auto sales, the act or practice in which a dealership pays less than the actual value for a trade-in. Suppose a customer has a car worth $5,000 and wishes to buy another worth $10,000. In an under-allowance, the dealership may accept $3,000 for the trade-in, leaving the customer to pay $7,000 for the new car.