Should You Trade in Your Car or Sell Privately?

Deciding whether to trade in your current car or sell it privately can be a tricky choice. Generally, when you trade in a vehicle, the dealer will probably give you less than if you sold it independently. This is because they will factor in the cost of reconditioning and reselling the car for a profit.

On the other hand, you will need to invest more time and effort if you decide to sell your current car privately. You will need to advertise, respond to questions about the vehicle, and deal with negotiations and paperwork. Typically, opting to sell a car to a private party can get you more money than trading it into a dealer, especially if your car is still in good condition.

However, there are many other factors to consider, and both sides have their share of pros and cons. In this article, we'll look at the pros and cons of trading in a car vs. selling it privately to help you make an informed decision.

A brief overview of a trade-in vs private sale

A trade-in and a private sale are two completely different ways of selling a car. Also known as a part exchange, a trade-in means exchanging your current car for a new one. When you trade in a car, the dealer takes it off your hands and applies credit toward the purchase of your new ride.

Selling a car to a private party involves finding an interested buyer and working with them directly. This process involves more uncertainty and work than a trade-in since you have to list your car online, take photos, and communicate with prospective buyers. Once you have found a buyer, you will have to deal with paperwork and payment, which can leave you vulnerable to car-selling scams.

Pros of trading in your car

Trading in a car at a dealership is a popular option for most car owners. It's the easiest and most convenient way to get a vehicle off your hands, and getting a new ride from a dealer simplifies everything. Here are a few pros of trading in your car.

It is a much quicker and hassle-free way to get a new car

Trading in your car with a dealer allows you to instantly use the vehicle's value towards a new ride. It also eliminates all the steps you need to take when selling a car privately, making the whole process quicker and hassle-free. You won't have to worry whether or not you have sent in all the paperwork correctly or if the buyer will pull out at the last minute.

Furthermore, you don't have to worry about making any mistakes yourself (which is very likely if you are not an auto sales expert). The dealer has completed the process numerous times, and they will handle all the work on your behalf, including taking care of paperwork, pre-owned financing, and completing the transaction.

An additional benefit of working with a dealership is that they will notify the driver and vehicle licensing agency (DVLA) on your behalf. Your legal obligations will already be fulfilled once you are all set for a new car.

Potential savings on repair and detailing

When you sell your car privately, the interested parties will expect it to be in its best condition. For you, that could mean spending hundreds of dollars on interior or exterior detailing services only to find out the buyer isn't interested.

In a trade-in, the dealer is ready to take your car as-is, and they will do all the reconditioning and cleaning before they put it on the market. Instead of using your money to detail or repair your current vehicle, the money could be used towards making a larger auto down payment.

Transparency and safety

It's much more difficult to find the best deal when you sell your car yourself. Furthermore, as stated above, you may become a victim of online scams. You are likely to fall victim to forged bills, counterfeit cashier's checks, or the cancellation of a wire transfer via PayPal or a bank. Trading in your car with a reliable and trusted dealership allows you to get the best possible price for your vehicle with fewer chances of being exploited.

Potential tax benefits

In some states, you might get a tax benefit or exemption on buying a new car when you trade in your current vehicle. While tax benefits can vary depending on your state, most areas only require you to pay tax on the difference between the car you want to buy and your trade-in value.

For instance, if you want to buy a car that costs $35,000 and the dealer offers you $15,000 for your trade-in, you will only be taxed on the remaining $20,000. If you sell your car privately, you will be required to pay tax when selling it and when purchasing a new one.

Cons of trading in your car

A trade-in might not be the best option for every car seller. Here are a few drawbacks to consider if you decide to part-exchange your car.

Lower value for your car

How much you get for your vehicle in a trade-in depends on its make and model, how new it is, and its condition. However, you generally won't get as much from a trade-in as you would from a private-party sale.

Dealerships are in business, so there is no allowable scope to profit from the sale if they give you the full price. Before visiting a dealership, take a few moments to find your car's trade-in value through Kelley Blue or Edmunds.

Escalated new car price

Buying a new car at the dealership where you are trading in might not be the best option. The dealer may try to make up for the possible loss on your trade-in by asking you to pay more than the sticker price for a new ride.

On average, a new car buyer pays $990 more when they trade in than when they do not. Brand loyalty doesn't always pay off in the trade-in game. Therefore, it's good to negotiate your trade-in and new car prices separately.

Limited negotiation power

The dealer's trade-in value is usually non-negotiable, meaning you might not get the best deal for your car. Trade-in offers vary based on what the dealer already has on their lot, your vehicle's condition, and how confident the dealer is that your car will sell. To lower dealer negotiations and create much wiggle room, get a few trade-in quotes and auto loan preapproval offers from different lenders or competing dealerships.

Pros of selling your car privately

Regardless of your situation, selling your current car to a private buyer offers many options. You can sell a non-functional car, auction it off, part it out, or find a collector to lift it for the right price. Selling a car on your own isn't the most convenient option, but it's still a good move. Here are a few benefits of selling your car privately.

Potential for higher sale price

Dealers usually offer a trade-in value below the market price to compensate for reconditioning expenses and potential profits. Selling a car on your own allows you to bargain for a higher price closer to the vehicle's actual market value.

You could even get strategic with your offer by charging slightly less than the dealership. You will still get a considerable return than you would trading in your car, and you may attract more potential buyers. You only need to know how to market your listing to the right audience.

You have full control

Selling your car to a private party gives you full control over the selling process. Needless to say, you have to be realistic when listing your vehicle for sale. However, you can negotiate and work with different buyers until you find a price you are comfortable with.

You can also increase the price if you find out that people are willing to pay more for your car. The only thing that will limit your negotiation power is the current market demand for vehicles like yours. However, if your car is in high demand in the current market, you might receive multiple offers, allowing you to choose the best deal.

Cons of selling your car privately

While selling your vehicle on your own can be deceptively easy, there are a few risks and responsibilities that you should consider before moving on. Here are some drawbacks of selling a car on your own.

Effort-intensive and time-consuming

Perhaps the most significant disadvantage of selling your vehicle to a private buyer is the time and labor involved. You have to research and understand what price you should ask for your car, advertise the vehicle on your own, schedule test drives, respond to queries, and handle any paperwork associated with the sale.

Limited warranty

When you sell a car to a private party, the car is as-is. That means you aren't likely to offer any warranties or guarantees to potential buyers. This may cause some buyers to be concerned and not want to buy a car from you.

Bottom line

Choosing whether to trade in or sell your car privately should be based on what best suits your needs. For most people, it's better to just trade in the car for a new ride and be done with it. However, if you are willing to devote some time and effort to the process, selling your vehicle to a private buyer can yield financial and educational rewards. Whichever option you opt for, ensure you handle all the procedures and paperwork correctly to avoid unwanted surprises down the line.