Automotive Loans: Trade In or Sell a Car?

by Amy Lillard

(2/7/2013) If you're purchasing a car to replace your current car, you face a choice — trade in or sell outright?

Trading in a car involves bringing it to the dealership and offering it as part of your purchase price. The dealer will examine your car and specify the amount they will pay you, which can then be used as part of the down payment for your next car.

There are distinct benefits to trading in a car:

• Simplified process. When trading in a car there's no need to advertise, field disparate offers, and take excessive time out of your schedule. There's no need to worry about the intricacies of title transfer and other ownership issues. You simply bring the car to the dealership on the day you wish to purchase your new car. Once a price is negotiated the dealer handles the entire transaction.

• Reduced loan. Using a trade in can significantly increase your down payment, which reduces the amount you need to finance. This will save you money in the short term on monthly payments, and over time in the form of interest.

• More options. If you're still financing a car you wish to sell, dealers are far more equipped and likely to take the trade. They'll contact the lender and pay off the balance, ensuring a smooth transition.

• No takebacks. When trading in, the dealership assumes all responsibility for the vehicle and mechanical issues. Whereas a private buyer may try to seek additional money after the fact if an issue comes up, once you leave the dealer you will not be contacted about the car again.

Another option available to car buyers seeking to sell their current car is to sell outright. This will involve advertising the car and seeking a private deal. There are definite benefits to this route as well:

• Better deal. The price offered by dealerships on trade ins is often less than what owners can get through private sales. Their goal is to obtain the car at a discount, counting on the convenience offered at their dealership to get people to agree to lower purchase prices.

• More options to buy. By selling privately, you can shop at any number of dealerships. Trading in will typically restrict your purchase to that specific dealership.

Automotive Loans: Trade In or Sell a Car?

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Amy Lillard

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