Written by: Jen Wagner
Last updated: February 3, 2023
Owning a car is a big responsibility. Along with paying for expenses like gas and insurance, you must stay on top of routine maintenance to keep it running well. However, one aspect of vehicle ownership you might not consider—until the time comes—is deciding how to get rid of it. At some point, you will have to choose whether to trade in or sell your car privately. But how do you know which option is best?
The most practical solution for you may not be as cut-and-dry as you’d like, and how you reach a decision will likely depend on several factors. To help you gain a clearer perspective on what might be best for you, let’s explore the benefits of both by asking a few simple questions.
What Do the Numbers Tell You?
Everyone knows that automobiles depreciate over time. But several factors can significantly impact a used car’s resale value. The easiest way to learn how much your vehicle is worth is by utilizing an appraisal tool like the ones found on the Kelley Blue Book (KBB) and Edmunds websites. Both sites promote accurate vehicle market estimates, giving free access to calculations in minutes.
All you need to do is provide information concerning your car’s make, model, year, mileage, color, condition, features, and VIN/plate number. After inputting the data, you’ll receive 3-4 estimates, including trade-in and private-party values. Alternatively, you can opt for an in-person assessment by contacting a local dealership and requesting an appraisal.
As you examine the numbers, consider how significant the difference is between the trade-in value and private sale estimates. Will you lose more money by trading it in? And is it enough of a difference to push you one way over the other?
Do You Still Have an Outstanding Loan?
Once you have your appraisal numbers, you’ll want to consider how much is left on your auto loan unless you’ve already paid it off. Compare the private party and trade-in estimates with any remaining balance. Ask yourself, “Does the amount cover the rest of the auto loan if I trade it into a dealership? If it doesn’t, the dealer might suggest rolling that balance into your new vehicle loan, resulting in you paying more interest and having a higher monthly payment.
On the other hand, a private sale could be more practical if your goal is to boost profit. Since dealerships typically offer less than wholesale value to increase their earnings, selling on your own could result in more cash in your pocket and/or paying off the loan.
How Much Free Time Do You Have?
Although trading in your car at the dealership takes time, it’s less time-consuming than selling it yourself. Private sales require advertising, answering calls, negotiating, and being available for potential buyers to test-drive the vehicle. In addition, getting into a car with a complete stranger could be distressing for some, requiring a vetting process and additional steps to ensure your safety. All of these things require more time spent on your end. To execute a private car sale, you’ll also have to gather critical car documents (i.e., title information and maintenance records) and complete specific paperwork.
At the dealership, however, most of the leg work is done for you. A used car associate will test drive and appraise your car and then make you an offer. The dealership’s finance office will also take care of the paperwork to complete the sale and transfer the title, along with anything else the DMV needs to proceed with the transaction. They’ll also contact your insurance company to update your policy information, which means less work for you.
Are You Low on Cash?
What happens if you need to buy a new car but don’t have the finances to cover a downpayment? A quick way to get the money is by trading in your vehicle and applying the amount to your next purchase, especially when you need a fast transaction. Depending on the location of the sale, you could also reduce your sales tax cost. Certain states with a sales tax only require paying the difference between the trade-in amount and the new-car price. Hence, you could save more tax dollars with a trade-in when buying another vehicle. However, selling to a private buyer and purchasing another vehicle at a dealership would cost you more.
That said, a private sale can be more advantageous if it makes you more money and covers the cost of your next vehicle’s sales tax. It can also be the right choice when money isn’t an issue, and you don’t need it for a downpayment on another car.
Do You Have a Car Warranty?
Whether you trade-in or sell your car, investing in a transferable breakdown coverage plan can help boost its worth and give the subsequent owner peace of mind. Investing in an auto warranty demonstrates your commitment to prioritizing maintenance and keeping your vehicle in top condition. A well-cared-for car equals one of greater worth. Review our top providers to discover the best vehicle warranty program for your circumstances.
