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Trade-In Vs. Private Sale: What to do with your old car?

last updated November 16, 2013 by

So it’s time to trade in your trusty used automobile for a newer ride.  You take your used car to the dealer, but they only offer you a fraction of what you think it is worth.  Is it worth it to look at trade-ins, or would you be better off trying to sell your car to another owner by yourself?

How do Trade-Ins Work?

When you trade your car in to a dealer, the dealer makes two different value decisions.  Firstly, the dealer compares the cost of your trade in to the dealer’s profit margin on the new vehicle that you are buying.  If you are buying a very expensive vehicle, or one that the dealer makes a great deal of money on, the dealer will be more apt to offer you a high trade-in value for your old car to induce you to use his dealership for your new purchase.  Secondly, the dealer considers the amount of money that he/she can get for your old car, whether by selling it on his own lot or by auctioning the car off.

Dealers have hundreds of different expenses that they must take into account when they buy your used vehicle.  The dealer must consider the cost of repairs and reconditioning, the cost of staff, the advertising budget, the lease on the car lot, even the cost of a business license.  For this reason, dealers will always offer less for your trade-in than you could get on the private market.

The Private Market

Well, if a dealer offers less for your car, isn’t it a no-brainer to sell your car on your own?

Not necessarily.

When you trade a vehicle in, you are able to take the money received for the trade off of the value of your new car.  Rather than paying income tax on this value, it is rolled straight into the new purchase, saving you money in the long run.  Additionally, trade ins are much less hassle than private sales, rather than dealing with haggling and advertising you can usually get a written offer the same day you bring your vehicle in to the dealer.

Tips for selling a car on the private market

If you are going to sell your car on the private market, there are a few tricks to get the most money you can for your vehicle.  Make sure to take “dealership quality” pictures, using a high resolution camera and capturing every angle of your vehicle.  List the vehicle on a variety of different marketplaces to increase exposure, and be flexible on the purchase price.  With the strength of free internet listings, it is rarely advisable to list your car in paid services like newspaper classifieds or auto trading magazines.