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The decision to sell your car for cash or trade it in can depend on a few factors. But it's important for car owners to understand what they're leaving on the table if they decide to trade in a vehicle because it's more convenient.
Here's what you need to know and how to determine which path is the best for you.
Find Out How Much Your Car Is Worth
There are a lot of things that go into your vehicle's value. How old it is, how many miles it has, its condition, extra features and other factors can all help you set a reasonable price.
It's also important to note, though, that each car has two different values: One as a trade-in and one as a private-party sale. In virtually every case, your vehicle is worth more in a private-party sale than as a trade-in.
That said, the gap between the two values can vary, and depending on your car, you may not actually lose much by trading it in. Visit a website like Kelley Blue Book or NADA Guides to find out how much your car is worth.
When Should I Sell My Car Myself?
Here are some situations where it makes sense to sell your car for cash instead of trading it in:
- You can make a lot more money on the sale.
- You have the time required to sell the vehicle.
- You have enough money for a down payment on your new car without needing to sell the old one first.
- If you traded it in, you'd get less value than what you owe on the vehicle.
However, there are also some reasons to think twice about trying to sell your car on your own:
- You don't have the time to go through the sometimes lengthy process of selling a car.
- You're not experienced in negotiating, and you're worried about losing value to a savvy buyer.
- You don't have enough cash for a down payment on your new car.
If you decide to sell the vehicle yourself, you'll start by cleaning both the interior and exterior to make it ready for prospective buyers—if it's dirty, you could have a disadvantage during negotiations. Even spending the money on a full detail could net you more return on the sale. Next, you'll list the car on local classifieds and websites like Craigslist.
Once you start receiving calls, you'll need to take the time to answer any questions prospective buyers have and ride along on test drives when they come to see the vehicle. You'll also need to negotiate and be willing to be patient for the right deal.
Once you agree on a price and the buyer pays you, you'll need to sign over the title to the new owner if you have it. If you don't, you'll need to get payment from the buyer and use it to pay off your loan and request that the lender sign over the title to the new owner.
When Should I Trade In My Car?
Trading in your car can be the right move in certain situations. Here are just a few examples:
- You don't have time or the desire to go through the private-party sale process.
- You don't have a down payment and can't afford the new car without one.
- You prefer the convenience the dealership provides.
- You're not worried about losing money by trading in your vehicle.
There are also some clear disadvantages to keep in mind. Here's when you should consider avoiding a trade-in:
- You'd lose a significant amount of money if you traded it in.
- You have time to go through the selling process and negotiate the best deal for yourself.
- You don't need extra money for a down payment on the new car.
If you decide to trade in your vehicle, make sure it's clean when you visit the dealership you want to buy a car from. Let the salesperson know you want to trade in your current vehicle, and they'll start the negotiation process. Do your research beforehand to understand the car's value and use that information to negotiate a better deal.
Once you've come to an agreement, the dealer will buy the vehicle, use the money to reduce the sales price of the new one, and if you have an auto loan, pay it off on your behalf.
Get Your Credit Ready for a New Car Purchase
Whether you sell your old car or trade it in, it's important to build your credit before buying a new vehicle if you plan to finance the purchase. Interest rates can vary wildly, and if your credit score is in poor shape, it could cost you thousands of dollars. If this is the first time you're seeking an auto loan, research how to get a car loan before you apply.
Check your credit score to get an idea of your overall credit health, then review your credit report for more information on how you can take steps to improve. This process can take time, but the results of a lower interest rate can be worth it.