What Are the Pros and Cons of a Trade-In Vs. Private Sale?

What Car Shoppers Need to Know

• If you’re considering replacing a vehicle, it helps to figure out your priorities ahead of time in order to best weigh the pros and cons of whether to trade in or sell yourself.
• If time is more important than money, trade in your old car toward your new car and wash your hands of it.
• If you have the time and motivation to get top dollar, your effort just might pay off with more cash in your pocket.
• You can also take a hybrid approach and list your car locally while you research your new car, check out Instant Offers on Cars.com, and trade it in when the time comes if you don’t get any worthwhile bites.

There are two prevailing trains of thought for when it’s time to get rid of your old car and buy a new one. Some want to get the job done quickly with minimal hassle, while others count on extracting every last penny of value by selling for the highest possible price.

However, minimal effort rarely yields maximum returns. If you’re considering shuffling out the old car to welcome in a new one, it helps to figure out your priorities ahead of time; then you can decide if you’d prefer to trade in your old car at the dealership when you buy your new car or if you’d rather take your chances in the used-car market and perhaps get a higher price by selling it yourself.

Related: Car-Buying and Ownership Advice

Trade-In Pros

• It’s easy. Regardless of whether you’re trading in or selling via private party, there’s a checklist for what you should do: Gather your paperwork, collect all accessories and key fobs, remove personal items, and give the exterior and interior a decent cleaning. However, a dealership is either going to send your car off to auction or professionally recondition it before putting it on the lot. Don’t overexert yourself, though; it’s not as important to a dealership as it might be to a private party since a dealership will be more experienced at evaluating a car’s value regardless of minor flaws.
• It’s fast. If you show up to the dealership to buy a new car and you’re planning to trade in your old one, a dealership rep will likely evaluate your car and prepare an offer while you’re walking the showroom, going on test drives and perhaps even negotiating a deal on your new car. Chances are that’s much faster than dealing with random tire kickers in person.
• You can negotiate. It takes just a few minutes to get a cash offer from an online marketplace, such as Ccom’s own Instant Offer tool. Consider getting a few different offers so you can use the best one as a bargaining chip. If you’re planning to buy a new vehicle from a different brand than the car you’re trading in, it may be worth a trip to your current brand’s dealership to see if they’ll give you an offer in writing (though you should mention that you don’t plan to buy a car there). Keep these numbers to yourself until after you get an offer from the dealer you’re shopping at; many dealerships will match a higher cash offer to avoid losing a new-car sale.
• You may save big on taxes. In many states, the value of a trade-in effectively reduces the sale price of a new car. For example, if you’ve negotiated a price of $50,000 for your new car and you accept a dealership’s offer of $10,000 for your used car, you only pay sales tax on the $40,000 difference.
• The deal’s done right then and there. If you sell your car to a private party, you’re responsible for dealing with the payment, paperwork (title and registration) and any tax you owe, per your state’s department of motor vehicle guidelines. If you trade in your car when you buy a new one, it’s all handled right then and there by the dealership. You might pay an extra documentation fee, but it’ll save you a lot of time and hassle.

Trade-In Cons

• Dealers generally pay lower prices for a newer car. A dealer will typically offer the lowest value for your used car. That’s because a dealership will need to invest money in repairs, cleaning and advertising to make a profit off your car. You’ll likely get the most money if you have a low-mileage, late-model used car that will qualify for a brand’s certified pre-owned programs, but even though CPO vehicles command higher sales prices, the dealership must invest labor and materials to recondition and sell a car as CPO.
• Dealers generally pay lower prices for an older car, too. Most new-car dealerships won’t bother to recondition and resell a used car with very high miles, significant damage or outdated technology. If your trade-in won’t be desirable to a dealership’s customer base, it’ll likely go straight to auction, which costs the dealer money and provides a lower return on their investment.
• There’s a perception that you’re stuck or desperate. If you’re trading in your car when you buy a new car, the salesperson is likely to lowball you, assuming that you’re really counting on whatever money you can get. You can, and should, negotiate your trade-in price, but you ultimately might not have much leverage without extensive preparation.
• There’s increased potential for tricky math. Car salespeople can sometimes try to make the process as confusing as possible, particularly when it comes to numbers. If you’re trading in a car as part of a new-car purchase, make sure to negotiate the new car’s price and the trade-in’s price as two separate transactions. Both are big-ticket items and should be treated as such, but a crafty salesperson may interrupt the negotiation on your new car to talk about your trade-in, hoping you’ll lose track of your progress or forget any verbal agreements you may have made. Keep good notes during your conversation, and don’t let the salesperson muddy the waters by conflating the two vehicles’ values.

Private-Sale Pros

• You’ll likely sell for a higher price. Whether your car is just a few years old or considerably older, a private sale is probably how you’ll get the highest price. This may be an especially useful strategy if your car is unusual or particularly valued by a collectors’ community, though such a scenario is the exception rather than the rule.

Private-Sale Cons

• The prep can be laborious. To appeal to shoppers, your car will need to be as clean as possible, free of personal items and debris, and in good working condition. Consider doing some minor maintenance because features like new tires might not increase your car’s value, but bald tires might cause shoppers to skip over your car completely. Get your car’s paperwork and keys together. If you have a loan on your car, consider paying it off in full to get the title in hand, if possible. It can take days or weeks for a bank to close out a loan and mail a title, and many shoppers won’t want to deal with a seller who isn’t ready to complete the sale right then and there.
• You’ll need to be fair and objective. Obviously, you’ll need to be honest about your car’s condition, but we’re not just talking about dealing with buyers — we’re talking about being honest with yourself, too. When a dealership or online marketplace gives you a price for your car, those offers come from an expert using data and facts with no emotion involved. It’s up to you to price your car fairly and be upfront about its condition without getting too attached; otherwise, you’ll talk to a lot of aggravated potential buyers who feel misled, and you’ll waste everyone’s time.
• You’re dealing with the general public. Answering phone calls, emails and messages about your car is a time suck at best and downright dangerous at worst. Check out our guide to a private-party sale to ensure you’re protecting your privacy and minimizing risk when you meet with potential buyers.
• Completing the transaction demands attention to details. In a private-party sale, you’re responsible for all the finicky details. Most states’ websites have a guide to private car sales, with a checklist of the steps and links to the necessary forms. Make sure you have your paperwork ready to go, and arrange a safe place for your buyer to transfer funds, such as at your bank. Finally, make sure to file your paperwork promptly and notify your insurance company that you no longer own the car.

How to Maximize Your Return

The takeaway: Do what works for you. If time is more important than money, trade in your old car toward your new car and wash your hands of it. If you have the time and motivation to get top dollar, your effort just might pay off with more cash in your pocket. When you look up your car’s estimated market value with resources such as our Sell Your Car page, you may even find that the difference between the trade-in and private-party values aren’t going to make or break your budget.

Of course, you can also take a hybrid approach, such as listing your car locally while you research your new car, checking out Instant Offers and trading it in when the time comes if you don’t get any worthwhile bites. Either way, preparation is key. Whether you sell to a private party or a dealership, a reasonably clean and well-maintained car will always get the best results.

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• Can I Sell My Car if I Still Owe Money?
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