Upgrading your vehicle is an exciting thought. The not-so-exciting part is figuring out what to do with your current car or truck. Taking a few key factors into consideration will help to take the worry out of your choice.
Know the going rate: Before you can know what is a good deal for a trade-in, you need to know the going rate for your current vehicle. Check out kbb.com to learn what your car or truck is selling for right now.
Bottom line dollars: In almost every case, you will be able to get more money by selling the car yourself. Compare what you learned online about the vehicle’s value with what you are being offered for trade-in.
Getting value quickly and easily: Selling a car on your own can take time. The payoff will usually be better, but it might take weeks to get your vehicle sold. If you are going to buy your next vehicle before you sell your current one, how long will you be able to afford two car payments?
Your next vehicle purchase: If you are going to be buying your next vehicle from a private seller, the idea of trading in your current vehicle is a moot point.
Current vehicle condition: Just because the listed value for your vehicle is $8,000 doesn’t mean that is what you are going to get. Your car or truck might need minor or even major work for you to get that price. Subtract these costs from what you anticipate you will be able to sell your vehicle for when comparing it to the trade-in offer.
Post-transaction issues: When you trade in a vehicle, the dealer has essentially said that they are accepting the car as-is. If you sell your vehicle privately, you need to be aware that the buyer may come back to you with complaints if problems arise. Legal issues could come about if the buyer is dissatisfied.
Possible tax benefits: Some states bestow tax advantages on people who trade in vehicles by only applying sales tax to the difference between the trade-in value and the sales price of the new vehicle you are buying. This out-of-pocket boost might help to make up the difference between the trade-in amount and the price you could get for the vehicle by selling it on your own.
Another option: Some dealers offer the choice of selling your car on consignment through them. Even after the dealer takes commission (usually no more than 10% of the sale price), you will likely still get a higher dollar value than you would by trading in the vehicle. Not all dealerships offer this, but it can be worth looking into if the option is present.
Car transaction will probably be among the biggest dollar amount deals you make in your personal financial life. Carefully weigh the pros and cons of the available options before you commit to one course of action.