Sell or Trade?

At new-car time there's nearly always an accompanying question: What to do with the old car? If you've already promised it to your daughter so she can take it to college, your decision is made. But for most of the rest of us, we have to decide whether to trade it in on the new one, or sell it ourselves.

The Usual Truth

Right up front, here is a near-universal truth: You will get more for your old car if you sell it yourself. There are, understandably, some exceptions to this rule and some conditions. One big exception occurs if your current car is on a lease program that provides certain benefits if you trade it back in and lease another vehicle of the same brand. Most manufacturers offer such lease programs. For people who absolutely, positively must have a new car every couple of years, these programs have their advantages. One big condition to the idea of selling it yourself is dependent upon the marketability of the car in question.

Let's cover that issue. Real estate agents will tell you that the easiest homes to sell are those that are, pretty much, like the other homes in the neighborhood. It's the oddball custom-built homes, or the ones with strange interior decor, or weird backyard gardens, or offbeat add-ons -- or the one that's been remodeled to the point of being the most expensive house on the block -- that are the difficult ones to unload. If it's an unusual house, it's going to require an unusual buyer.

The same goes for cars. What's easy to sell are four-door Honda Accords and Toyota Camrys and the like, with medium to higher-end trim levels, and with no silly modifications such as racy spoilers, fancy wheels, loud exhausts, paint stripes, lowering kits, boom-box stereos or even window tinting. When you go to sell the car, your task is easier if it's a nice, clean, normal car-because that's what most of the market wants. And, most definitely, if the car isn't a nice, clean, normal one, no dealership is going to want it for a trade-in.

Trade Advantage

Here is the advantage for trading it in: Basically, you don't have to "hassle with it." In fact, that's exactly what many new-car buyers say about the question of trading in or selling. "I don't want to hassle with it," they'll say, and then gloss over the unpleasant little truth that avoiding that hassle might easily cost them thousands of dollars.

Any used car will have a certain retail value. If that car is sold by a dealership, the dealership will have some expenses involved, for things such as cleaning it up, getting it past any necessary smog certification, maybe fixing a few dents and scratches, and just the overhead of running the business. Therefore, if two identical used cars are for sale, one by a dealership and one by a private owner, it is to be expected that the one at the dealership will carry a higher price. On the flip-side, the dealership purchase will offer certain advantages to the next buyer: If something goes wrong with a used car bought at a dealership, the new owner has a place to take it and, to a certain extent, expect a reasonable fix. But the used car bought from a private party includes no such implication or warranty, and if something goes wrong the new buyer should expect to be on his or her own.

Since the dealership has to make a profit on its used cars -- in fact, dealerships make a lot more money on used cars than new cars -- it must therefore purchase that vehicle for less than retail value. When a dealership takes a vehicle in trade, the dealership is in effect buying it from the customer of the new car, and at a price that is, of necessity, below retail. That's what's known as the trade-in value; that's why trade-in is less than retail.

By-Owner Realities

But when you sell your old car yourself, you can set any asking price you want. If you're reasonable you'll ask a fair price, something around retail. If you get a price that's something around retail, you'll make more money than if you had traded it in. But, there's that "hassle."

People will say they don't want to "hassle" having to get the old car cleaned up. And they don't want to "hassle" having to place the ad in the paper or the Auto Trader. And they don't want to "hassle" having to stay home on Saturday, waiting for the phone to ring. And they don't want to "hassle" waiting around the house for potential buyers to show up. And they don't want to "hassle" with the impolite, ill-mannered people who promise to show up but don't. They just "don't want to hassle with it."

Here's another part of the deal: If you trade in the old car, you can drive away in your new car right now, show it to the neighbors this afternoon, take it to dinner tonight. Wow! But if you decide to sell your old car, then put that money toward the new one, you're going to have to wait a while before you can get your new-car fix. More "hassle."

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