So you’ve decided you no longer want your car. Now you need to think about the difference between trading a car in versus selling it yourself.
The best choice for you depends on several factors including your timeline, your budget, and how comfortable you are interacting with strangers. Follow along, and we’ll take a look at the biggest pros and cons of both options.
A Closer Look at Trading a Car In
The primary benefit of the trade-in is convenience. Trading a car in allows you to kill two birds with one stone. You sell your old car, and you put that money towards the purchase of a new one.
All of the legal documents, payment details, and getting the car ready for resale become the responsibility of the dealer. You just sign on the dotted line and your job is done.
The whole transaction takes place in a clean and safe professional environment, and you can complete the deal whenever you’re ready. That’s pretty convenient.
As an additional benefit, most states offer a tax break for trading a car in. The value of your trade-in is deducted from the price of your new car, and you only pay tax on the difference between the two. This tax break can be worth hundreds or thousands of dollars depending on the details of your transaction.
Wholesale Pricing - The Trade-In Trade-Off
When you’re buying a new car, that’s where your focus is. The trade-in is a secondary consideration for many people. Because they’re focused on their new car, not their old one, some people get a little confused when they see their trade-in offer.
The bottom line: trade-in prices are always lower than private party sale prices.
When you sell a car privately, you take on a lot of responsibility - more on this below. In a trade-in scenario, the dealer assumes the responsibility of getting your car ready for resale and managing the selling process, and their trade-in offer will reflect the additional work they’ll need to do.
So while trading a car in is much more convenient than selling it yourself, the trade-off is money. The price you get for your car will be a wholesale price rather than a retail price.
At the end of the day, a trade-in process is fast and easy, with the additional benefit of a lucrative tax incentive. But the price of your car will always be lower than if you sold the car yourself.
Selling Your Car Instead of Trading In
Selling your car is a big commitment. You will probably get a higher price for your car than you would get by trading it in, but the trade-off in time and effort will be significant.
If your number one priority is price, and time is not a consideration, then selling your car privately may be the best option for you. This is often the case for people selling a unique car like a sports car, a hobby vehicle, or a vehicle that’s outfitted for professional work.
In cases like these, the difference between the trade-in price and the private sale price can be significant enough to justify the additional effort of selling the car on your own.
But if you’re selling a regular daily driver, and you’re also in the market for a replacement vehicle, trading in is probably the way to go. The difference between the trade-in price and the retail price will likely be offset by the tax break and the convenience factor.
Stranger Danger and the Drawbacks of Private Party Sales
For many people, the need to communicate and meet up with strangers is the biggest drawback of private party sales. After you’ve decided on your asking price and written your classified ad, you’ll have to field phone calls, emails, and text messages from complete strangers.
This becomes an even bigger problem when you start to find serious buyers who want to test drive your car. This can take a lot of time, and meeting strangers from the internet can be a very risky proposition.
When you finally find the right buyer, you’ll have to negotiate the price on your own. As the seller, you’re responsible for signing over the title and managing all of the required paperwork with your state DMV. Failure to file the right documents can leave you with a legal liability in some states.
Final Factor: The Timing of the Transaction
Trading a car in shouldn’t be much of a scheduling problem. Even the smallest dealership can typically process a trade-in on the same day, if necessary. Selling your car outright is an entirely different dilemma.
Depending on the condition of your car, how fast you work, and how much experience you have, getting your car ready for sale could take days, weeks, or more than a month.
After your ads have been posted, you could end up waiting days, weeks, or months to find the right buyer. The amount of time it takes depends on the quality of your ad, the condition of your car, and the local market demand. There’s really no way to know how long it will take.
If you the car in question is sitting idle in your garage, time might not be a big factor. But if this is your daily driver, the scheduling can become a problem. This is especially true if you’re in the market for a new car and you’re really trying to coordinate a schedule for two separate transactions.
As we’ve seen, trading a car in by far the most convenient option. It’s fast and easy, but you’ll get a wholesale price for your car. Selling your car is more difficult. It takes much more time, and there is some risk involved. But the price you get will be higher than trade-in price.
Whether you decide to trade or sell, The Appraisal Lane can help. Just upload pictures of your car and complete our simple questionnaire. In 30 minutes or less, our team of appraisers will give you a guaranteed offer that can be redeemed for cash or trade-in value at a dealership near you.