Trade In or Sell Your Used Car?

So, you are buying or leasing a new car or upgrading to a later model one. See my previous articles: “Buying a Car: New or Used?” and “Purchase or Lease a New Car?” How should you dispose of your old car? Trade in or sell? This article deals with the issues that should be considered before you decide.

Buying Privately or Through a Dealer

If you decide to upgrade by buying a later model used car through a private deal, then the fate of your old car is obvious. If you wish to dispose of it, you must sell it privately. If you choose to buy at a used car lot, many dealers will consider a trade-in. You will usually have the option to trade in your old car and receive credit towards the cost of a new one when you buy or lease at a dealership.

Trade-in Value Compared to Private Sale

It is generally accepted that you will receive less value for your old car on a trade than if you sold it privately. On a trade, the dealer has to handle your old car, which involves inspection, any necessary repairs and maintenance to meet public transport regulations, detailing and reselling at a profit. Therefore, it is obvious that in most cases the amount offered to you for your old car on a trade will be less than the amount you could obtain from selling it privately. How much less depends on several factors and should be considered when deciding to trade in or sell.

Age and Condition of Your Old Car

If your old car is ancient or has seen better days, with high kilometrage and noticeable wear and tear, most dealers will be reluctant to accept it as a trade because of its low resale value. If you insist on trading, the dealer may accommodate you in order to complete the sale, but the credit you receive will probably be much less than what you might have realized by selling it privately.

Before choosing to trade in or sell, you should explore the trade-in option more carefully if your old car is a later model and in good condition, with average or lower kilometrage. The credit offered towards your new purchase may compare reasonably to what you might receive on a private sale. Also, keep in mind that the trade-in credit is deducted from the price of your new car, thus reducing the sales tax that you will pay.

Another noteworthy point is that the higher the value of your old car, the more difficult it may be to sell privately. Once you have entered the $10,000. plus range, you are competing with a myriad of dealers including used car lots and new car dealerships with “pre-owned” cars, all offering some form of warranty and other enticements.

How to Determine the Value of Your Old Car

There are a number of sources available to assist you in determining the fair market value (FMV) of your old car. There was a time when only car dealers and financial institutions had easy access to the latest edition of the “Red Book” or “Black Book”, which provided detailed information on the FMV of most vehicles. Today, the internet provides an abundance of sources for this information. Simply search for “car values” and you will find various car pricing sites which are user-friendly. The various classified ad sites are another useful source of car value information. With this source, you can compare used cars of the same make and model that are similar to yours in age, condition, kilometrage, options and location. Doing a little research can be very helpful before you trade in or sell your used car.

Hassles of Selling Your Old Car

As with any worthwhile endeavor, there is some work and responsibility involved when selling a used car privately. You must advertise the car, which can be done easily and cost free, with window signage and through most public classified ad sites on the internet. You must be prepared to “show” the car, which means receiving inquiries and arranging for viewings and test drives. You must ensure that adequate car insurance is in place to minimize any risk during these test drives. When a deal is reached, you must complete a bill of sale and a motor vehicle registration transfer form. It is highly recommended that you accept only cash, bank money order or certified cheque as payment.

Conclusion

In many cases, selling your old car privately rather than trading it can be financially beneficial. Some car owners are very comfortable doing this, while others would rather avoid the hassle by trading. I hope that this article has provided you with some insight into the issues involved and will help you to decide whether to trade in or sell when it is time to dispose of your old car.

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