Trade in, Sell, or Auction?

Researching and test driving a new vehicle can consume much of your energy during the exciting weeks leading up to the eventual purchase. Owning a brand-new vehicle is part of the American dream, and it's fun to imagine all the road trips, family adventures, and weekend projects your truck, SUV, or minivan will play a central roll in. However, attention also needs to be paid to the sale of your current vehicle, particularly if the funds are needed for a down payment. Dollars in your pocket from a favorable sale price on your used vehicle are just as green as those saved on negotiating the price for a new one.

"Do you have a trade-in?" These words will be among the first you'll hear from a new-car salesperson or finance manager as you begin negotiations. If you did your homework, you'll have an idea of the price you could get for your old ride in a private sale. And you'll also know there's a big difference between the wholesale price the dealer will deem it's worth and the retail price the next owner will likely have to pay for it. In other words, if you trade it in, you're letting the dealer make a lot of money off you.

Oh sure, the dealer may say he's giving you a good price for your trade-in, but he'll make it up on the new-car deal. Of course, if you're in a hurry to buy and need to use the value of your old vehicle as down payment on the new one, you're at the mercy of the dealership. They're in business to make money and therefore will only pay you the wholesale price for your old ride. If they plan to sell it on their own used-car lot, they have to make a profit. Even if they immediately resell it to another dealer, that dealer is only going to pay wholesale, as it will have to make a profit itself. However you look at it, if you trade in your old vehicle, someone somewhere down the line will make a profit from it. And it won't be you.

If you're trading in a car that's a different make from the one you're buying, you might get more money by selling it directly to a dealer that sells that make or even to an independent used-car dealership. Then, at least, you can pocket the profit the new-car dealer would have made wholesaling your trade-in to another dealership. In dealer parlance, selling a used car to a dealership without buying another one from them is called a "street sale." An added advantage of going this route is that it removes the used-car value from the equation in your negotiations with the new-car dealer.