Your “baby” has passed the 100,000 miles milestone. Although the car still performs admirably, you know now is the best time to trade in the vehicle, as the value of the car will never be higher than it is now. The same principle applies to selling the vehicle on the open market to a private buyer.
Trading in a vehicle at a dealership presents several advantages for car owners. However, you need to be aware of a few disadvantages that might change your mind.
Pros of a Trade-in
One of the best reasons to trade in your vehicle involves convenience. It is much easier to trade in a car than it is to sell the car on the open market. You bring the car into a dealership and negotiate the trade-in value on the spot. For selling a car to a private buyer, you have to create and upload advertisements, as well as visit every qualified buyer to show the vehicle.
Here are some other advantages of trading in a vehicle:
Down Payment on New Car
A trade-in can reduce or eliminate the down payment you have to make on the purchase of a new car. As a form of bartering, trading in your vehicle improves your cash flow. You have more liquidity to make other purchases, possibly for another high value purchase.
Lower Purchase Price on New Car
With a trade-in, you can opt to reduce the price on the purchase of a new car. Instead of saving money on the down payment, you plunk down cash for the down payment and then reap the financial benefits of a lower sticker price on the new vehicle.
You negotiate the price of the trade-in, sign the required paperwork, and then leave the dealership. Another reason trade-in deals take less time to finalize than the time it takes to sell a car is because at a dealership, you deal with only one person. Selling your car introduces you to several potential buyers who take their time researching the vehicle to determine accident history and other issues that can cause future problems.
Someone Else Deals with Car Maintenance
When you trade in your vehicle at a dealership, the dealership becomes responsible for fixing scratches and making repairs. Dealerships have the equipment and professional expertise of mechanics to take care of minor to medium maintenance issues.
No Irate Buyers
Selling your car to a private buyer can lead to complaints about performance or maintenance issues. After you trade in your vehicle at a dealership, you never have to worry about receiving phone calls from an irate buyer.
Cons of a Trade-in
A dealership wants to make as much money as possible from accepting your car trade-in. This means you probably will not receive an offer for full retail value. If you trade in your car as part of a transaction to purchase a dealer car, you can expect the dealers to low ball your trade-in offer. For example, the value of a 2014 Honda Civic in pristine condition is $10,091. The trade-in value for the same vehicle is only $9,150, which is nearly a $1,000 difference. Moreover, not every make and model vehicle trades well with dealerships, especially older and less popular cars.
Limited Buying Options
When a dealership places a value on your trade-in and then agrees to buy the car, you have just limited your car buying options to the dealership that accepted the trade-in. Selling your car to a private buyer allows you to take the cash to any dealership in town to buy a vehicle. For instance, you sell your three-year old Ford Taurus to a private buyer and instead of going back to the closest Ford dealership, you have set your eyes on a brand new Chevy Silverado.
Remember one important car trade-in lesson. Negotiate the price of the car you want to purchase from a dealership first and then negotiate the value of your trade-in. By conducting two separate negotiations, you have a much better chance of receiving more value for the trade-in vehicle. Moreover, you can forgo the trade-in process and instead, sell your vehicle on the open market.