Should You Sell or Trade In Your Car?

When the time comes, you can either sell your current car or trade it in during the process of getting a new vehicle. Either of these methods can be beneficial, depending on your desired outcome. Consider the pros and cons for each before you make your final decision.

Obtain vital vehicle information

Before deciding if you are going to sell or trade, you need to collect some vital information. To determine the trade-in value of your vehicle, Jerry Hirsch of the L.A. Times suggests referring to Kelley Blue Book® used car valuation service. This online resource requires the vehicle model, year, features and condition before giving you the best estimate. KBB® will give you a broad glimpse at what you could get for your vehicle, but you also need to consider your location and the time of year when selling a car.

Jeff Youngs of J.D. Power is quick to point out a convertible that sells in Florida during the summer might not generate the same amount of interest during winter in Michigan. Furthermore, certain models might be more popular in specific regions, such as all-wheel drive Subaru models in areas with snow. Location also plays a big part in tax codes. Tom McParland of Jalopnik explains you will only be taxed on the difference in value between a car you trade in and a new car you purchase from a dealership. Meanwhile, if you sell your car, you will be taxed for the vehicle’s entire worth.

Lower taxes vs. higher selling price

The tax difference is one of the most lucrative advantages of trading a car in to a dealership. You can also apply the trade-in value of your old vehicle as a down payment for your new car. However, selling a vehicle typically results in more money in your pocket. The Department of Motor Vehicles notes that drivers who sell their vehicles directly have more room for price negotiation than those who trade their vehicles in.

McParland warns that dealerships rarely offer more than their average trade-in value for some of the most popular vehicle models out there. If you own such a vehicle, you can take advantage of its popularity to earn far more money by selling it. On average, trading in your vehicle will result in less money, as opposed to selling it directly to a buyer. Whereas you have room for negotiations with private buyers, Youngs states that most dealers offer less than the calculated trade-in value and rarely alter their initial offer. If you are lucky, the tax advantage on your trade-in will make up for this lost value. If you are unlucky, however, trading in your car could cause you to lose out on thousands of dollars, which is why it’s best to shop around at multiple dealerships.

Existing damage and time-consuming issues

Ronald Montoya of Edmunds notes another advantage of trading a vehicle in at a dealership is you won’t have to worry as much about the condition of your existing ride. Most dealerships do their own repairs on trade-in vehicles, so taking a vehicle in for repairs ahead of time will likely be a waste of money for you.

Selling a vehicle privately, however, can be an expensive and time-consuming endeavor. According to Youngs, not only does it usually cost money to advertise your vehicle, but you’ll have to take time out of your schedule to meet with potential buyers. Private buyers will care very much about the condition of the vehicle you are selling to them. As such, Daniel Bortz of U.S. News says that drivers who plan on selling their old vehicle will often have to pay for extensive repairs.

Ultimately, you will have to carefully examine your old vehicle to determine whether trading it in or selling it directly will be the most beneficial method for you.

© 1995-2018 Kelley Blue Book Co., Inc. All rights reserved.


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