Before you go out and buy a new car, consider what you're going to do with the vehicle you're replacing. The two easiest ways are to sell it to a dealership when you buy or sell your new car to a private individual. So let's compare the two choices and see which one is going to give you the best return.
How Much Is Your Used Car Worth?
You should get a fair idea of value before you decide what to do with your car. In our view, Kelly Blue Book is the best place to go for used car prices. They have a great price engine that analyzes local and national vehicle sales to give you a rough value based on the quality of your car.
The cool part of KBB's car values is that they display average prices for trade-in rates, private party purchases, retail vail (buying a car from a dealership) and Certified Pre-owned vehicles (again from a dealership). What you will note is that Certified Pre-Owned Vehicles typically have the highest values for a specific model, followed by the suggested retail price for private vehicles.
The trade-in price is the lowest because the dealerships need to clean / prepare the car for sale, and then make a profit. Certified Pre-owned vehicles typically have the lowest trade-in rates because they have been certified against manufacturer's checklists to meet such quality standards. This often includes multi-point checks, the modification of certain liquids and consumables, such as wipers, and sometimes the replacement of tires or brakes. Such quality controls are some of the advantages of buying a certified pre owned vehicle.
Pros And Cons Of Private Selling
Price: You can usually get the best price if you sell your used car to someone else, as opposed to trading it in or selling it to a dealer. It can often be easier to negotiate with a person and on your own timetable than to negotiate with a dealership on a short timeline.
Hassle: Selling your car in private could be a hassle. It takes a lot of time and energy to sell your car. You'll need to take pictures of it, write down specifics and other details, list it online or in classified ads, and be prepared to answer a number of phone calls and questions. Then you'll have to deal with test drives, tire kickers, low-ballers, negotiations, etc. You also need to be aware of potential scams or thieves (some people who take your car for a test drive may never come back, offer to pay with a rubber check, etc).
Tips to sell your car privately. Be prepared to be flexible in terms of price and availability to let people look at it. Only accept cash or cash check from a local bank, ideally if you are there when it is printed. Craigslist is a great place to list your car free of charge. You can sell your car on Ebay, too, but be prepared to pay a listing fee. The added benefit is the ability to reach a much larger market. This can be an invaluable tool if you have a rare car or live in a small market.
Prepare the car You might be surprised by the number of people who don't take the time to clean their car until you put it on sale. Cleaning your car completely, inside and out, before taking pictures and putting it on sale is always a wise investment. Such additional tips will help you get the most value out of your private sale.
Pros And Cons Of Trade-In
Its quick and easy, and potential tax benefits: The biggest benefit of trading in your car is saving time and the difficulty of selling your vehicle on your own. There may also be tax benefits for trading in your vehicle. In most states, when you trade-in your car when you buy another vehicle, you are only required to pay sales tax on the difference between the trade-in cost and the price of the new car. (See below for a break-down of how money can be saved by trading in your vehicle).
Lower selling price: You will get less for your trade-in than if you sold it privately. Even with the tax breaks mentioned above, you may find that you are still going to make more money by selling it on your own. It's best to run the numbers to see what you'd have to be able to sell it privately to make your time and energy worth it. In some cases, it will be close, and in others, there is a clear advantage of selling it on your own.
Trading Tips For Your Used Vehicle
Negotiate price trading separately from the purchase price of your new vehicle. A favorite dealership trick is to complicate deals by negotiating both the purchase price of the car you are buying and the dealership at the same time. Many dealerships will also give you a very low price on your newer car, believing that you'll be happy with the price— then you'll be discounted by the exchange. Negotiating each price separately makes it a little easier to track. Once you take it to the dealership for a trade-in, you should also thoroughly clean and inspect your vehicle. You can get a better price for a clean car.
Is Trading Your Car Better?
Sometimes the dealership will only be able to offer you an auction price, which is likely to be much less than you would be willing to accept. And sometimes you can sell your car quickly and easily to a family member, relative, or coworker, and you don't have to think about the issues listed above. The tax benefits are also less substantial in countries with low sales taxes.
But it's all about convenience to trade in your car. In the second example above, the net difference was only $300 savings to sell the car yourself. If you add up the time and costs involved, that extra $300 may not be worth the trouble.
You can save time and money by trading in your car. When you trade in your car, the deal is going to happen that day. You do not have to place ads, locate a buyer, schedule test drives, wait for the buyer to arrange funding, or deal with any other problems, including future liability. You sign a few documents at the dealership, and the car is no longer your responsibility.
The next time you buy a vehicle, look at how much you can get by selling or exchanging your car. You might just find out that trading in your old car is actually the best deal.