If you’re planning on buying a new car soon, chances are you’re also trying to decide how to get rid of your old one. Should you sell it privately or trade it in? Both options have their pros and cons – it really comes down to your own priorities.
Is it better to sell a car privately or trade it in?
Whether to sell your car privately or trade it in is a simple decision. You need to figure out what’s more important to you – your time or your money. You’ll get more money by selling privately but it will require more effort. In most cases, you can’t have it both ways.
The problem is, so many people are seeking advice on the matter from the wrong sources. Of course, a dealership is going to tell you to trade your car in to them. That’s how they make money. On the other hand, websites that advertise your car for sale are going to tell you the opposite in their blogs.
My goal is to lay out the unbiased facts for you here. You see, I don’t want to flip your used car for a profit. I don’t want you to advertise it on my website. I’m not trying to provide financing for you or have anything to do with any of the transaction. I have nothing to gain or lose no matter what you decide.
Let’s jump right into what each option has to offer you in an effort to help you come to your own decision.
Benefits of selling your car privately:
You’ll get more money for your car
This is by far the biggest reason to sell your car yourself. No dealership in their right mind is going to pay you what your car is worth. It defeats the purpose for them completely – their business is based on buying cars for cheap and selling them for a profit. That’s how they make money. In order for that to work, there needs to be a winner and a loser. Unfortunately, the dealership rarely loses.
A used car dealership will typically offer you wholesale value for your car. That percentage can vary greatly depending on the model of car, its condition, and the region you live in. In many cases, it’ll end up being 70% of what your car would sell for (or even less).
The dealership acts as a middleman between yourself and the next owner of your car. They’re rewarded for their part in finding a buyer with a healthy profit. The thing is, the new owner isn’t going to pay more than the car is worth. That means the dealer’s profit has to come from your end of the deal. For many people, that’s unfair.
Want to learn more about your car’s value? Here are 6 Ways To Find Out How Much Your Used Car Is Worth:
You can cut the middle man out completely by finding a buyer yourself. In the end, your car will sell for the same amount either way. The difference is that you’ll get all of the money rather than sharing it with the dealership that in many cases, does little more than clean it up and take a few pictures.
You have more control over the sale
By selling your car privately, you aren’t told what your car is worth. It’s your call. Obviously, if you price it too high, you won’t get any interest. But if you’re confident in its value, you can choose any price you want. You lose all of that control when you trade it in to a dealership.
The dealership will tell you what they’re willing to pay for your car and it’s usually a “take it or leave it” type of offer. Sure, they might negotiate with you back and forth by playing around with the overall numbers of the deal but they’re often doing that to make it appear like you’re getting a better deal. The chances of them actually paying more for your car than they originally wanted to are quite slim.
By selling privately, you have all the power. No one can force you to sell your car – the final decision as far as numbers go is up to you. If you don’t like what you’re being offered, you can end the conversation and move on to the next potential buyer. At a dealership, they tell you how the deal is going to go down. You’re at their mercy.
You also have more control over the conditions of the sale. If you’re not completely happy with the price someone is offering you, you can sweeten the deal for yourself by selling the car as-is, removing parts of value, or making the sale more convenient for yourself.
Learn more about selling your car as-is in this article:
You don’t need to buy a new car
You might not be replacing your old car with a new one. Maybe you just want to get rid of what you have. Not all dealerships are interested in buying your car flat out without selling you a new one.
I hate to break it to you, but the dealership probably doesn’t want your car. Unless it’s fairly new and the same make as what they sell, your car won’t even be going on their lot. They’ll offload it to a wholesaler or another dealership. That applies to larger franchise dealers though. Smaller used car dealerships are a different story.
The point is that their goal is to sell you a new car, not get stuck with your old one. If you take the new car purchase out of the deal, they might not be interested. If they are still interested, they’re definitely going to make it worth their while (which will result in you getting less for your car).
Some dealers only accept certain cars
Even if you’re buying a new car, some dealers still won’t want your old one. Your car’s age, brand, and mileage will affect if they even want it at all. Take a Chevrolet dealer for example. They aren’t going to want your 20 year old Toyota Camry on their lot. Franchise dealers only want low mileage, late-model vehicles in their used car section.
If you have an older car, they’ll be sending it to a wholesaler or another dealer when your deal is completed. They don’t have much to gain in that case so they’re either going to offer you peanuts for your car or refuse it completely.
Click here to find out if your car is too old to trade in to a dealership:
You’ll be dealing with a less experienced negotiator
Car dealerships are businesses. Their salesmen aren’t trained to be your best friend. They’re trained to make money. They’re taught how to manipulate, distract, and persuade you. It sounds bad, but that’s just the nature of sales tactics. When the time comes to negotiate, you’ll be dealing with someone that works in those situations all day every day.
When you sell your car privately, there’s less chance of having the odds stacked against you by dealing with a trained negotiator. It’s more likely that you’ll be dealing with an average Joe much like yourself. The playing field is equal.
Of course, there’s still a chance that the person buying your car is an expert in negotiation, sales, and the art of the deal. It isn’t guaranteed though like it is at a dealership. The person working there is always going to be trained to steer the deal in their favor.
Benefits of trading your car in to a dealership:
There’s no denying that selling your car privately takes time. Sometimes if your car is desirable and you price it right, it’ll sell right away. That doesn’t always happen though. It can take weeks or even months for you to finally find the right buyer. You might not be willing to wait that long.
Trading your car in is by far the fastest solution. As soon as your new car is ready, they’ll likely be able to take your old one. Leave your old keys on the desk and grab your new ones. Your car is their problem now!
The ability to replace your old car with a new one within a day is a huge bonus for a lot of people. Not everyone has the time to go through the whole selling process. If your time is more important than your money, trading your vehicle in is a pretty easy choice.
Selling your car privately can also be a lot of work. You’ll have to do all of the things that the dealership would do yourself. That means fixing any problems, cleaning it up, advertising it, and dealing with potential buyers. For a lot of people, that amount of effort just isn’t worth it.
Having your car on the market for a long period of time can be exhausting. You might think that Potential Buyer #17 is finally going to be the one and they change their mind at the last minute. Back to the beginning of the process with the next person.
It doesn’t take long for frustration to build. Will your car ever sell or will you be stuck with it forever? It’s not uncommon for the process to result in some sleepless nights.
Trading your car in is as simple as walking into a dealer, having a discussion, and walking out. Sure, you’re going to lose money on your car but that’s about as easy as it gets.
The tax incentive
One reason people argue in favor of trading your car in to a dealership is the tax incentive that most states/provinces offer. Essentially, you only pay tax on the difference between what you’re paying for your new car and what they’re giving you for your old one.
Make sure to pay attention to the numbers here though. In some cases, the math still doesn’t end up in favor of trading your car in. Let’s take a look at an example:
Your new car will cost you $40,000
Your old car is worth $25,000
The dealership is willing to give you $20,000 for your old car
Let’s use Ontario’s tax rate of 13%
Your new car + tax would be $45,200. Subtract the $25,000 you’d get by selling your car privately and your new car will cost you $20,200 out of pocket.
Now if you trade your old car in, you’ll only be paying tax on the $20,000 difference between your old car and your new one ($2600). Your new car + tax would be $42,600. Subtract what the dealer will pay for your old car ($20,000) and your new one will cost you $22,600 out of pocket.
In this example, you’re still losing over $2,000 by trading your car in, even with the tax incentive. So don’t be fooled, make sure to calculate the numbers for yourself!
You won’t be stuck with too many or too few cars
Another thing some people forget to consider is the overlap of time between getting their new car and selling their old one. If you buy your new one first, you won’t have the cash on hand from selling your old one. You’ll also need enough space to park both of your cars until your old one sells. Don’t forget insurance on both too!
You could avoid that problem by selling your old car first. The downside here is that you’ll be without a vehicle until you buy your new one. That might not be an issue if your new one is in stock at the dealership. If you have to order it in or you’re looking for the right used car, that can take time. You’ll have to make sure you can live without a vehicle during that time.
Trading your car in is just that – a trade. As soon as your old one is gone, your new one arrives. The overlap between vehicles is one less thing to worry about.
Less chance of legal issues or scams
When you trade your vehicle in at a dealership, they’re in charge of handling the deal with the new owner. Any legal problems will fall on them. Unless you’ve purposely done something shady when trading your car in, you won’t have any legal liabilities to handle with the dealership.
The same can’t be said when selling your car privately. Unfortunately, there are dishonest people in this world. You’ll be responsible for any issues that arise with the sale of your car. This might be as simple as taking care of the proper paperwork or it could require dealing with an unhappy buyer or even a scammer. You’re on your own.
Should you trade your car in or sell it privately?
When it comes down to it, the decision is easy. What’s more important to you, getting the most money for your car or dealing with the least amount of hassle? As you can see, even with the tax incentive you’re still likely to miss out on some money by trading it in.
If an easy transaction is worth it to you, go ahead and trade it in. If you’re more concerned with getting every dime out of your used car, the clear choice is to put the work into selling it yourself.
No matter what route you choose to go, make sure to crunch your own numbers rather than take someone’s word for it.
Tim is the creator of Canadian Gearhead. His experience with auto detailing and working for Toyota shows through all of the articles posted here. He runs the Canadian Gearhead site and YouTube channel full-time now and currently owns a 2007 4runner, 2006 Tacoma, and 1991 MR2. Read more about Tim: