Should You Trade or Sell Your Used Car?

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."