Should I trade my car in, or sell it privately?Dec 23rd, 2010
I get asked this question a lot, by friends and clients alike, and to be honest, there is no right answer. The right thing to do depends upon so many variables that will be truly unique to your own situation.
Let’s face it, you’re probably thinking something along the lines of: “I really don’t want to go through the hassle of selling my vehicle privately, but I also don’t think the dealer is giving me enough for it…”
This is probably one of the most difficult decisions a consumer is faced with when trying to decide what to do with the vehicle they are currently driving. There are certainly advantages to both, but there can also be disadvantages that you may not always think of, or be aware of. What many of you may not consider is that both through private channels and through dealers, the market almost always sets the transaction price of a vehicle sale.
Let me explain. In the automotive business, or any other business of buying or selling products, a transaction only occurs at a price in which both parties agree to sell and to buy. The private vehicle market is no different. If you break the private sale down for a moment, you will likely find that the final transaction price is very similar to what you would find that same car sell for at a dealership.
Think about why an individual is selling their vehicle privately for a moment. It could be for a variety of reasons, and for sake of keeping this discussion short we won’t investigate the motivations of why people sell, but when they do, they naturally are trying to get the most they can for their car. Wouldn’t you??
If the dealership didn’t offer them enough for it, they often will try and sell it privately. So, if the vendor is selling it to get the most possible money for it, what are the buyer’s motivations for purchasing in a private environment? In speaking to friends and clients who have purchased vehicles privately, I often hear people say they can get better deals privately or it’s cheaper than at the dealership. I find this to be an interesting perception.
So, ironically, you have sellers trying to get as much as they possibly can for their car, and you have buyers who are trying to get these vehicles for a little as possible. Ultimately, that transaction will only occur when both sides are happy with the price. This is essentially the same process that occurs at a dealership.
The biggest difference between trading in and private selling is the process you have to go through as the seller. Once you decide to go the route of selling your vehicle privately, you will need to find out what price you want to ask for your car (retail). You may even look at local dealer websites to find out what comparable cars are listed for! You will then need to decide where and how to advertise it. In Vancouver, there are several excellent websites where you can list your car for free. Here are four of the most popular ones:
There are many other ways to market your vehicle to the public, some of them cost money, while others are free. You likely will have to incur some costs along the way when selling your vehicle privately.
- You will likely want to clean it or have it professionally detailed.
- You may have some damage on the vehicle you want to repair prior to sale.
- There may be some mechanical issues that need to be addressed prior to sale.
- You may incur marketing costs in listing your vehicle.
- You will have to keep it insured while it is listed so prospective buyers can test drive it.
- You may have to have a lien check and damage check done, because your prospective purchasers will likely want to see these documents.
These are just some of the potential costs to consider when listing your vehicle.
Once you have listed your vehicle for sale, congratulations! You are now competing with dozens of other offers to sell a car that is likely similar to yours. When you are selling to a potential client who you likely don’t know, they also don’t know you or your car.
As I mentioned before, they are most likely shopping for the best deal which means they are looking first at your price. If you are asking less than all the other sellers of similar cars, your will get phone calls and schedule some viewings.
On the other hand, if your car is in great shape and you are asking a premium price for it (and trying to get the most possible money for it as I suspect you are because that is why you are selling it privately in the first place), likely it will take a lot more work. Sometimes, if you are lucky, you may find a buyer quickly. More often than not, it can be a very frustrating experience that only ends after eventually trading at a dealership. You will often have to meet with several prospective purchasers who are complete strangers coming to your house (some keep their appointments and show up, but many do not), often at inconvenient hours while letting them drive your car using your insurance, and burning your gasoline. If they do happen to like it, after making 2 or 3 trips back to see it and drive it, they often will make you a low offer that you aren’t too happy with.
In the end, you may or may not get more for your vehicle than what you were offered by the dealer in the first place, not to mention the benefit of tax saving you will receive when trading in. One other thing many people don’t always consider when selling a vehicle is that fundamentally, used cars depreciate over time. In other words, the whole time you are trying to sell your vehicle, it is depreciating in value. So, if you are having difficulty selling it, the longer it takes, the less you are likely to get for it.
Selling or Trading to the Dealer
When you trade your car in, you are essentially selling your vehicle to the dealer. The dealer will appraise your vehicle and offer you a wholesale price for it. A wholesale price is essentially the price at which a dealer could purchase a similar vehicle for at one of many auctions that are held across Canada every day. There are thousands of cars and trucks passing through these auctions every day. Banks, leasing companies, Finance companies, repossessions, large corporations and other dealers use these auctions to buy and sell vehicles. Dealers are not going to pay you retail dollars for your car when they can acquire them at wholesale through auctions on a daily basis. If you want to get the retail dollars for your car, you are going to have to sell it privately, bottom line. While this wholesale price is probably going to be less than you had hoped for, it is certainly quicker, easier and a lot less hassle to trade your vehicle than to sell it privately.
Will the dealership make money on my traded in vehicle after it is reconditioned and readied for sale?
Most of the time, the answer is yes, however, there are times when a dealer is unable to sell the vehicle in a reasonable amount of time, and they too are not immune from the depreciating values of used vehicles, and occasionally have to sell the vehicle at a zero profit level, or even a loss.
The good thing for you at this point is that it is no longer of any concern to you. It becomes the dealership’s problem, and if they aren’t able to sell it in within a few months, they will likely find themselves having to sell your former trade in at one of these wholesale auctions, where they will not like the loss they will most certainly take. That is the risk the dealer takes on in the used car business, and it happens all the time.
Ultimately, only you can decide what works best for you in determining to sell your vehicle privately or trade it at a dealership. I hope this article can assist you when making that decision. After all, there are many good reasons why trading at a dealership makes sense. It is quick and easy. You don’t have to spend money cleaning it up, or fixing any groans, creaks or squeaks that may scare off potential purchasers. You also won’t have to worry about any potential mechanical issues that may come up after it leaves your possession.
As I mentioned earlier, there is no right or wrong answer, only a bunch of factors to consider. I certainly know what I’d do, but then again, my motivations may be entirely different than yours!