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Trade-in or sell your car? The upsides and downsides

What we'll cover

  • The upsides and downsides of selling your car

  • Pros and cons of trading in your car

  • Determining the most important outcome to you

Buying a new car is an exciting time. But for any car owners looking to get rid of their existing vehicle first, they may ask the question: “should I trade in my car or sell it”?

As any seasoned car shopper can tell you, there is no wrong or right answer, just the best option for you. With many other factors to consider, like the complexity of tasks or time obligations required for each option, it’s not just a question of money. Consider all of the pros and cons, alongside your own financial goals to find the right fit for your vehicle needs.

Should you trade in your car?

When you’re at the dealership and ready to buy, trading in your car can come with numerous benefits — but there are tradeoffs and understanding them can help you make an informed decision for your car.

Upside: More convenience

The most significant benefit of trading in your vehicle is it’s usually an easier process. Take your car to one or more dealerships where you’re considering purchasing your new car and ask for an estimate. (Find a dealership near you with Ally’s dealer locator tool .) Once you’ve secured an estimate you’re happy with, you can close the deal by completing the required paperwork.

Bonus: The car dealership usually takes care of transferring the title and registering the car. They may even pay off your existing financing, meaning one less hassle for you.  But make sure to read the fine print and get the details before signing on the dotted line.

Downside: Lower offer

Car dealerships are in the business of making a profit, and car trade-ins are no different, so they may give you less for your vehicle than what you might get if you sold it on your own. Dealer offers are typically less than a car’s wholesale price or what’s listed in various well-known car value resources.

Upside: Tax reduction

Not all states charge sales tax, but if yours does you might end up paying less taxes if you trade in your vehicle. Many states only require you to pay the taxes on the difference between your trade-in value and the cost of your sleek, new ride.

We encourage you to consult with a tax professional to find out more about what tax implications may look like for trade-ins in your state/area.

Should you sell your car on your own?

Selling your car yourself comes with the perk of a potentially larger profit, but bear in mind that you’ll have to put in some extra effort for that extra cash.

Upside: Higher sale price

Even after factoring in costs like detailing and maintenance to get your car into listing-friendly shape, you may still get back more of the car’s value by selling independently.

For example, Kelley Blue Book (at the time this was written) gives an estimated private-party value of $32,924 to $36,143 for a mid-range 2018 Ford Explorer in the Chicago area. But the trade-in-value doesn’t quite measure up at $30,092 to $33,033. Even if the ranges vary, the differences between these two estimates are reliably constant.

Do a little research on your own. Calculate the difference between your car’s trade-in value versus private-party value on websites like Edmunds and Kelley Blue Book. They will offer you valuable estimates for your car’s make and model with data based on sales in your area.

Downside: More sweat and time

Be prepared for some considerable legwork if you choose to sell your car to a private party. Some things you might need to account for include:

  • Vehicle documents, including title and maintenance records

  • An attractive and fair selling price

  • Cleaning

  • Repairs

  • A tune-up before you list it

  • Submitting descriptions and photos to websites and/or local newspapers

  • Reviewing potential buyers

  • Test drives

After you’ve checked off this list and found a buyer, you’ll still need to visit your local department of motor vehicles to register the car in the buyer’s name.

When privately selling, it can also take a while to find a suitable buyer depending on the type of vehicle you own and your local used-car market. All the while, you’ll likely need to keep your car registered and continue paying for insurance. So, don’t forget these costs in your calculations. In the end, if you need money sooner than later to buy a new car or pay down the financing for your new vehicle, selling your car on your own might not be the best route to take.

The two questions you need to answer

Ultimately, when it comes time to decide whether to sell or trade in, you need to answer two questions: How important is getting the maximum sale price for your old car? And how much effort are you willing to put into selling it? Armed with this information, you can make the decision that best fits your situation and move forward confidently with your sweet new ride.

Whether you trade in or sell your vehicle on your own, locate a dealership near you to find your next set of wheels with Ally’s dealer locator tool .

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