Pros And Cons For Trading In Your Car

After spending a few years driving your vehicle, it’s normal to want a change. The excitement you felt as you drove it off the dealership lot has dissipated. Now, each time you see a new model on the road, you might feel an urge to go car shopping again. If you decide to buy a new car, you’ll need to figure out how to offload your current vehicle. Your choices are limited to selling it yourself or trading it in. Below, I’ll explain the pros and cons of using your current car as a trade-in for a new model.

Pro: Tax Advantages

Whenever you buy a new or used car, truck, or SUV from a dealer, you’ll have to pay sales tax. Depending on the price of the vehicle, the sales tax can climb to hundreds – even thousands – of dollars. If you sell your current vehicle to a private party and purchase another model from the dealership, you’ll have to pay sales tax on the entire amount. On the other hand, if you use your current ride as a trade-in, its value will be deducted from the price of the new model. That lowers the amount of sales tax you’ll need to pay.

Con: Less Money

In nearly every case, you will be able to sell your vehicle to a private party for more money than you would get from trading it in to a dealer. The reason is partially due to the motivation behind the purchase. For example, a dealership wants to sell it to another customer in order to make a profit. To do that, they offer a lower trade-in value; the less they offer, the more profit they can make. By contrast, a private party isn’t interested in making a profit. They just need a reliable source of transportation.

Pro: Less Effort

Even though you stand to make more money by selling to a private party, doing so requires work. You’ll need to place an ad, field phone calls, and make yourself available to show your car to prospective buyers. Along with that, some people will request to have a mechanic test your vehicle. When you trade it in to a dealership, it’s as easy as haggling over the value, signing the paperwork, and handing over the keys. Less time and less effort.

Con: Ongoing Monthly Payments

As long as you’re maintaining your car properly, keeping it for a few more years is usually less expensive than trading it in for a new one. Most people don’t purchase a new vehicle outright, even when they use their current one as a trade-in. Instead, they negotiate the price and choose monthly payments. That’s expensive.

Long-time readers of my column will know that I’m a proponent of keeping your vehicle and replacing parts when necessary. Changing the oil every 5,000 miles and periodically replacing spark plugs, air filters, and other parts can keep your ride running smoothly over the long haul. Even if you need to rebuild the transmission or replace a head gasket down the road, you’ll still come out ahead.

Trading in your car offers advantages and drawbacks. If keeping it for a few more years isn’t an option, at least you’ll have the right expectations.