Save Time and Money by Trading in Your Car (Updated)
Editor’s note: This post was originally published on 9/7/16 and has been updated for accuracy and comprehension.How do you get the best deal for your old car when you buy another car? Most people will tell you the best deal is to sell your old car on your own instead of trading it in to the dealership. We disagree. We believe most people can save time and money by trading their car in – if they are able to get a fair price for their car.Tax benefits of trading in your carThere are tax benefits to trading in your old car. In most states, when you trade in your car when purchasing another vehicle, you’re only required to pay sales tax on the difference between the trade-in value and the price of the new car.Let’s look at an example that explains why we believe it can be better to trade in your car:Without Trade-in:New car purchase price: $30,000Taxes paid (7% of $30,000): $2,100Used car sold by owner: $16,000Total cost of new car: $32,100 – $16,000 = $16,100With Trade-in: (Remember, in this example, the price of the trade-in is deducted from the price of the new car for tax purposes).New car purchase price – $30,000Trade-in Value: $15,000Taxes Paid (7% of $15,000): $1,050Total cost of new car: $31,050 – 15,000 = $16,050You’ll find that even with lower numbers, the final result is very close. For example, when you buy a $25,000 car and have the option of selling your car yourself for $11,000 or trading it in for $10,000, selling the car on your own results in an extra $300 after tax benefits are considered. That $300 represents real money in your pocket; but we still think trading your car in can be a better deal. Here’s why:Trading in your car can save you time and money. Trading vs sellingWhen you trade-in your car, the deal happens that day. You don’t have to place advertisements, locate a buyer, arrange test drives, wait for the buyer to line up financing, or deal with any other issues, including future liability. At the dealership you sign a few papers, and the car is no longer your responsibility.When you sell the car yourself, there are no guarantees. You’re responsible for listing the car for sale (which can cost money), finding a buyer, arranging a test drive, dealing with the buyer’s financing, determining a safe and secure method of payment, and handling other paperwork. Did we mention that it may take you several weeks to do everything?In addition to the hassles of listing the car and finding a buyer, in some states the seller can be held liable for problems that occur shortly after the sale. Trading your car in negates those legal liabilities.Is trading in your car always better? No. Sometimes the dealership will not give you a fair offer, and sometimes you can sell your car quickly and easily to a family member, friend, or coworker and not have to worry about the issues listed above. The tax benefits are also less substantial in states with low sales tax.But, trading in your car is all about convenience. In the second example above, the net difference was only $300 savings for selling the car yourself. When you add up the time and costs involved, that extra $300 may not be worth the hassle.Weigh your options carefullyThe next time you buy a car, investigate how much you can get by selling your car or trading it in. You might just find out that trading your old car in is actually the best deal.The knowledgeable and friendly sales staff at any of our Serra Auto Park locations will be happy to help you figure out the best option. Come and see us today!