Do dealers really pay less for trade-ins than private buyers?

Typically, yes. A dealer has to inspect, recondition, store, market and warranty-check a car before reselling it, and they need room for profit, so a trade-in offer is usually below what a private buyer might pay. In exchange, you get speed, convenience, no strangers to deal with, and in many states a sales-tax credit on your next car. Compare the net result of both options, not just the headline numbers.