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The Pros and Cons of Trading in Your Vehicle

The Pros and Cons of Trading in Your Vehicle

When it comes to vehicles, one man’s trash is always another man’s treasure. Used car dealerships are constantly on the lookout for more secondhand cars to add to their inventory and will apply the price of your trade-in to the purchase of your next vehicle if you buy it through them. Before you decide whether to trade it in or sell it yourself, weigh your options.

Working With the Dealership on a Trade-in

Dealerships typically show clients one set of figures; the price of the car you are interested in buying and trade-in value of the car you want to sell. The amount of money you pay is the difference of one subtracted from the other. However, you should know that the way a dealer calculates trade-in value usually results in a lower selling price.

Trade-in value is equal to dealer cost (car you want), minus appraised value (your vehicle) plus desired profit. Like any business, dealerships need to be profitable and manage their inventory accordingly. But even though you might get less for your vehicle than you would if you sold it yourself there are benefits to using your old car as a trade-in.

It may not be common knowledge but one of the benefits of a trade-in is a reduction in sales tax. The amount of sales tax put back in your pocket with a trade-in vs. selling it yourself could add up to be the difference in your selling prices, or at least bring the two closer together, making a trade-in a more profitable choice in the end.

Another major benefit is letting the dealership handle all of the paperwork. Transferring a car title to a new owner can be a tricky process if done incorrectly. In addition to less paperwork, trading in a vehicle means you don’t have to worry about the extra time it may take to sell it yourself. You also don’t have to worry about strangers coming to your home to test drive your car or worry about the extra repairs to get the vehicle in good selling condition. Many dealerships will take a vehicle “as-is.”

Selling a Vehicle Yourself

The biggest advantage to selling a vehicle yourself is the ability to ask a higher price. You may not always get your starting asking price, but the majority of the time the vehicle will still sell for more than a dealership is willing to offer in a trade-in.

It is easier to understand the process of buying and selling a car without trading it in. There is no need to guess at how much your vehicle will appraise for because the true market value becomes the price someone was willing to pay. You also may find you enjoy negotiating the sales process and discover a hidden talent within yourself.

But beware that your profit is truly a profit. There are usually added costs to selling a vehicle privately. Those choosing to buy secondhand cars expect a vehicle to still look its best so you will have to add in the expense of detailing your car for the new owner. The cost may be upwards of $100 or more.

Buyers also expect a vehicle to work. If you are selling your vehicle because of repairs you cannot afford, the buyer needs to know. If there are more problems that pop up soon after the sale, the buyer might blame you. Dealerships have experience in this situation.

Take the above information to heart and consider the true value of your car. Search ads to find out how much cars like yours are selling for. Call a dealer and ask how much he would give you for the car with or without trading it in. Assess your needs according to what you have and how much you are willing to do and then make the best decision based on your situation.