If it’s time to buy a new car, you might wonder if it’s better to trade in your old car or sell it outright. In many cases, you’ll come out ahead if you sell your car yourself. But that’s not always easy to do, which is one reason why many people decide to let a dealer do the work instead.
When you trade in your vehicle, the price is based on its wholesale value. When you sell or buy a car from another individual, the price is based on its private party value. When dealers sell a car, the price is its retail value. These three values can vary by thousands of dollars, depending on the vehicle.
Do you have a car loan? If you do and you’re undecided about whether to trade or sell, the first thing to do is contact your lender and get the buy-out value. Let’s say you still owe $6,000 on your car. The dealership is offering you $6,200 for a trade and the private party value is only $6,500. In this case it would probably be better for you to simply trade your car in. However, if the private party value was $7,000, you could sell it privately with a potential profit of $1,000 – meaning you’d make $800 more than you would on the trade.
Here are four more things to consider when you’re deciding whether to sell or trade in your old car:
|Cleaning||Just remove your personal items and the dealership will take care of the rest.||You’ll want to thoroughly clean the car or have it professionally detailed. The costs will come out of your profit.|
|Minor Repairs||If the car has bad tires, a cracked or chipped windshield, missing knobs, scratches, small dents, or other small issues, you can leave it as-is and a dealer will accept it. You may not get as much for the trade as you would if everything was perfect, but the cost of these repairs compared with the wholesale dollars you’ll recoup means it’s not worth it to go all-out on fixing minor blemishes.||You should be able to recover most of the money you spend making minor cosmetic repairs (bad tires, a cracked or chipped windshield, missing knobs, scratches, small dents, etc.) and the vehicle may even sell much faster. But if the car has several minor things that need to be fixed, repairing them all could severely cut into your net profit.|
|Legalities||You’ll simply need to sign a few papers in the dealer’s finance and insurance office and the dealership will take care of everything from there.||If you’re making payments, you’ll need to arrange the payoff on the loan. There will also be fees for notarization, title transfer, licensing, etc. Since the laws vary from state to state, contact your local Department of Motor Vehicles to find out what you need to do to make it a legal sale.|
|Advertising||(No fees involved.)||You can post on craigslist for free or you might want to pay for an ad, which can range from $25 in a small local paper to $100 and up if you go with a large used car website.|
The bottom line is don’t forget to factor in the time and effort involved in preparing your car for sale, fielding telephone inquiries, and showing it to potential buyers.
When you add everything up, you can make a nice profit from selling a car yourself rather than letting a dealer give you just the wholesale value for it. Yet if your profit margin will be slim, it could be much easier for you to let a dealership handle the sale.