Should I trade in my car or sell it?

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In a Nutshell

Depending on the car you have, the decision to trade it in or sell it privately could result in a difference of hundreds or even thousands of dollars. But the hassle of selling your car privately may not be worth the extra cash.
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Buying a new car is exciting, but it might leave you with the nagging question of whether you should trade in your old car or sell it yourself.

Beyond the money you could get for trading in your car versus selling it on your own, there are other factors to consider, such as the legwork involved with each option. Let’s take a look at the pros and cons of trading in a car versus selling it on your own.

Should I trade in my car?

Trading in your car can come with several benefits — but you likely won’t get as much money for the sale.

Pro: Less hassle

A key benefit of trading in your vehicle is that it could end up requiring less work on your part. The process generally involves heading to one or more dealerships to get estimates, choosing where you want to trade in your car, and closing the deal at the dealership by completing sales paperwork. The car dealership may take care of transferring the title and registering the car, and might pay off your old car loan if you have one. But you’ll want to check with the dealership to make sure it’s handling all of those details, which would mean much less hassle for you.

Pro: Reduced taxable sales price

If you live in a state that charges sales tax, you might end up paying less tax if you trade in a vehicle. Many states require you to pay tax only on the difference between your trade-in amount and the cost of the new car you’re buying.

Con: Lower offer

Car dealerships want to make a profit on trade-in cars, so they may give you less for your vehicle than what you could potentially get if you sold it yourself. Dealers generally offer less than a car’s wholesale price, which is the price a dealer might pay to buy it at a car manufacturer.

Should I sell my car on my own?

When it comes to selling your car privately, the biggest benefit might be the cash — but you’ll have to work for those extra dollars.

Pro: Higher sale value

Even after you account for the cost of detailing and any maintenance for your car before it’s listed, you may still get more money if you sell it on your own.

For example, Kelley Blue Book provides an estimated private-party-value range of $13,756 to $15,027 for a 2016 Honda Civic LX Sedan with just under 46,000 miles, in the Dallas area. But the trade-in-value range for the same car is only around $11,022 to $12,041. Keep in mind that these price ranges can fluctuate.

To calculate the difference between your car’s trade-in value versus private-party value, websites like Kelley Blue Book and Edmunds offer both trade-in and private-party value estimates for your car’s make and model, based on sales in your area.

Con: More work and time

Selling a car to a private party can require considerable work on your part. You may have to gather documents like your car’s title and maintenance records, determine a fair selling price, clean and list it, screen potential buyers, and even go on test drives. And after you’ve done all that and found a buyer, there’s a bunch of paperwork you need to complete so that the buyer can register the vehicle’s title in their name.

Selling your car to a private party might take a while, depending on the type of vehicle you have and the local used-car market. During this time, you may need to keep your car registered and continue to pay for car insurance. If you need cash quickly to buy a new car or to help pay down a new car loan, selling your car privately might not be the best move for you.


Selling your car privately if you owe more on it than it’s worth

You can sell a car you’re “upside down” on, but it may be tough. If the price the buyer pays for your car doesn’t cover your car loan balance, you might have to come up with the rest of the cash you need to pay off your loan.

Bottom line

The decision to trade in a car or sell your car privately essentially comes down to two questions: How important is getting the maximum sales price for your old car, and how much work do you want to do to sell it?

But if you still owe money on your car loan and can’t pay it off now, you might want to wait to sell or trade in your car. Otherwise, you might not be able to sell your car privately. Some dealers might pay off your old loan if you trade in your car. But if you go the dealership route and owe more on the car than it’s worth, you may end up rolling over your current loan balance into your new car loan balance — a move that could increase your monthly payment and the interest you pay over the life of the loan.

About the author: Lance Cothern is a freelance writer specializing in personal finance. His work has appeared on Business Insider, USA and his website, Lance holds a Bachelor of Business Administration in … Read more.