When you’re ready to upgrade to a new car, you might wonder whether it’s better to trade in your old vehicle or sell it outright. The answer depends on several factors, including how much money you need for a down payment, how much time you’re willing to spend on the sale and whether you’re attached to your old car.
Let’s take a look at the pros and cons of each option so that you can make the best decision for your situation.
Trading in Your Car
Trading in your car is a popular way to help finance a new car purchase. According to the National Automobile Dealers Association (NADA), 43 percent of new-car purchases involve a trade-in.
The best advantage of trading in your car is that it’s the easiest option. You can do it all in one day at the dealership, and you don’t have to worry about listing your car, scheduling test drives or haggling over price.
However, trading in your car also means that you’ll likely get less money than if you sell it yourself. This is because dealerships need to make a profit on the sale, and they’ll lowball you on the trade-in value to ensure they can do that.
If you decide to trade in your car, be sure to do your research ahead of time to know what it’s worth. Bring along any recent repairs or maintenance documentation, as well as records of regular oil changes and tire rotations. This will show the dealership that you’ve taken good care of the car and help them give you a fair price.
Also, be keenly aware of the supply and demand situation with the dealership you’re working with. If they’re getting a lot of trade-ins for the same make and model of car as yours, they might not give you as much money since they already have plenty of that model on their lot.
But on the other hand, if your car is in high demand, you might be able to negotiate a higher trade-in value. For example, recently, Forbes said it could be the best time to sell your used vehicle, thanks to supply chain issues.
Selling Your Car
Selling your car yourself will almost always net you more money than trading it in — sometimes tens of thousands of dollars more. However, it’s also more time-consuming and requires more effort than trading in your car.
When you sell your car yourself, you’ll need to list it online or in print publications, schedule test drives with prospective buyers, handle all the paperwork and negotiate payment. This takes time and effort that some people would rather not spend.
If selling your car yourself sounds like too much work, but trading it in sounds like too big of a financial hit, another option is available: refinancing your car loan.
Your Third Option: Refinancing
You can lower your monthly payments without getting rid of your current vehicle when you refinance a car loan — a win-win situation! The process is simple. Instead of paying off your loan to the original lender over several years, you take out a new loan with a different lender (often at a lower interest rate) and use that loan to pay off the first.
This frees up extra cash each month that can be put toward other financial goals — or used to upgrade your ride sooner than planned.
Before deciding whether to refinance your auto loan, compare offers from multiple lenders to ensure you’re getting the best deal possible. And remember — just because refinancing offers some great benefits doesn’t mean it’s right for everyone. Be sure to weigh all your options before making a decision. Then, use our refinance car loan calculator to see if it’s right for you.
There’s No Right or Wrong Answer
Regardless of whether you trade in or sell your automobile, there’s no right or wrong answer. It all depends on what is best for you. For example, if you’re looking to upgrade your car sooner than later and don’t care as much about earning top dollar for it, trading it in at a dealership might be the best option.
However, if you’re not in a rush and want to get the most money for your old vehicle, privately selling it is usually the best option. And if you’re not interested in getting a new car but still want to save money on your monthly payments, refinancing your existing loan could be the best option of all.
Whatever decision you make, just be sure to do your research so that you can get the best possible deal.
