It’s always exciting to buy a new car, but the car buying process often confronts you with an important financial decision: what to do with your old car. Your options include trading it in, selling it privately or donating it to charity for a tax deduction.
If you think you’d like to trade your car in, here are the pros and cons, as well as some tips to help you get the most money for your car.
Trading vs. Selling
It’s important to know that you generally won’t get the best price for your car by trading it. In most cases, you can sell your car for more than what a dealer will offer. However, trading your car in is much more convenient.
As a private seller, you’ll have to advertise your car, interact with potential buyers, show your car and haggle over the price. Additionally, if the buyer has questions after the sale, you might continue to get emails and phone calls. Trading your car in allows a clean break from all of these issues. If your time is more valuable than the money you’d save, trading makes sense.
Another advantage to trading is that you might save money on the sales tax of a new car. In most states, you’ll only pay sales tax on the price difference between your trade-in and the new car. For example, if the new car sells for $30,000 and the dealership agrees to give you $10,000 for your trade, you’ll only pay sales tax on the difference of $20,000.
If sales tax is high in your state, the savings could make the difference between a private party sale and your trade-in’s value less drastic.
Know Your Car’s Value
Before you head to the dealership, it’s important to know what your current car is worth. Sources like Kelley Blue Book ( ) and Edmunds ( ) can help you assess your car’s value. By looking at your car’s mileage, options, year and condition, these sources can give you a ballpark figure of what a dealer should offer you if you decide to trade your car in.
You’ll also be able to see how much your car is worth if you sell it as a private party or to a dealer. These estimates will help you make sure that you get a fair price for your car, but you may be able to get more or less, depending on the used car market.
Look for used cars that are for sale in your area to see what the market is like. If used cars like yours are selling for significantly more than the estimates you see online, you may have some extra negotiating power since your car is in demand.
Get the Most Money
When dealers analyze your trade-in, they’re kicking tires just like you would if you were buying a used car. If you want to get a good offer, it pays to present them with a car that looks like it was well-kept. Give your car a thorough cleaning inside and out. A clean car can add value to your trade, and if your car looks like it was taken care of, it suggests that the dealer doesn’t have a potential lemon on its hands.
If the dealer notices that your car needs repairs, they’ll probably use that as leverage to knock down your car’s value. It’s often worth the time and money spent to repair these issues so that you can get the best price for your car. But if you don’t want to pay for repairs, get an estimate to take with you. If the dealer low-balls you, you can use your estimate to counter their negotiations.
Keep the Negotiations Simple
Dealerships often use a worksheet to crunch numbers, which can cloud the negotiating process. These worksheets combine the price of the new car with your trade-in’s value and loan balance (if it’s not paid off), as well as sales tax, tags and title and any additional dealer fees.
Doing this makes it easy to lose some negotiating power, since the worksheet combines two negotiations into one. Keep it simple by negotiating the price of your new car first. After you’ve agreed on a price, you can focus on getting the most money for your old car.
Trading your car in for a new one is easy, but using these steps will help keep some hard-earned money in your pocket. Know your car’s value and do your best to keep the negotiating process simple. When the numbers are clear, it will be easier to ensure you get a great deal on your next car.