Here’s the latest reader question, along with my reply!
Dave asks: Enjoyed your article. May I add two big reason why people prefer trading in cars to privately selling them? First, the tax credit. Most states allow the trade value to be deducted from the new car’s price to determine sales tax due. In some places, that could amount to as much as 10 percent. Two – privacy/security/convenience. Many folks don’t want to deal with strangers coming to their house, test driving their cars and worse yet – obtaining financing to complete a purchase. Add to that, private sellers may have an encumbered title which needs to be paid off before receiving clear title. Motor vehicle agencies can perform some services, but they don’t play banker – which dealers do. All this for an average difference of approximately $1,500 after reconditioning expense makes the selling of your car very painful and time consuming (don’t forget the sales tax credit which could amount to thousands of dollars).
My reply: As always, there are pros and cons to everything. You’ve just adduced some of the cons of selling a car yourself – though I hope I was clear in the article that one of the main problems with trading a car in isn’t trading it in, per se. It is mixing up the negotiation on the price of the new car with the negotiation over the credit you’ll get for the car you’re trading in.
There is also a middle ground solution: Prep the car you’re planning to trade in. So it looks as good as it can – and so that the dealer’s appraiser can’t nitpick it to death.
PS: I disagree with you on the “average difference” being $1,500 (selling yourself vs. trading in). Because the difference in retail between an excellent condition example of a given vehicle vs. a merely average example is much higher than that. And it’s often very possible to bring an average example to excellent with some elbow grease and a little needed maintenance.
I know people who make a good living buying – and selling – cars this way. I agree it’s not for everyone and for the average person, it may be more convenient and is certainly less work to just trade in their old car.
It all comes down to how much you want to pay for that!
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Another reason to sell on your own is if your car isn’t run-of-the-mill. I’ve got a couple that I’d be lucky to get half of what I’d get if I traded in versus selling on my own. And if I found one of these unique cars on a used car lot, I’d be very suspicious – the ones I have seen on used lots are in need of structural repair due to rust, looking for some unsuspecting kid. Eric’s likely in a similar position with his Trans Am.