Should You Sell Your Car or Trade it In? – The Math Might Surprise You!

Some links below are from our sponsors. Here’s how we make money.

Advertiser Disclosure: Opinions, reviews, analyses & recommendations are the author’s alone. This article may contain links from our advertisers. For more information, please see our Advertising Policy.

My wife and I are looking for a more family friendly vehicle, and we will need to get rid of one of our current vehicles when we buy a new one. The good news is, we aren’t in a rush to either buy a car or sell a car, so we have time to do…

My wife and I are looking for a more family friendly vehicle, and we will need to get rid of one of our current vehicles when we buy a new one.

The good news is, we aren’t in a rush to either buy a car or sell a car, so we have time to do the research and make the best decision for our needs. This isn’t always the case if you are in a rush to buy a car – for example, your vehicle is totaled in an accident, or if it is stolen. But since we have time, we closely examining our options.

Should You Trade in Your Vehicle or Sell it Privately?

Before you go out and buy a new vehicle, you should consider what you are going to do with the vehicle you are replacing. The two easiest ways are to sell it to the dealership when you buy your new car, or sell it to a private individual. So let’s compare the two options and see which one will give you the best return.


How Much is Your Used Car Worth?

Before deciding what to do with your car, you should get a good idea of the value. In my opinion, the best place to go for used vehicle prices is Kelly Blue Book. They have a great price engine that analyzes local and nationwide vehicle sales to give you a rough valuation based on your vehicle’s condition.

The cool part of the KBB car values is that they show average prices for trade-in values, private party sales, suggested retail vale (buying the car from a dealership), and Certified Pre-owned vehicles (again from a dealership). What you will find is that the Certified Pre-Owned vehicles usually have the highest values for a specific model, followed by the suggested retail value, private party sales, then the trade-in value.

The trade-in value is the lowest because the dealerships need to clean/prep the car for sale, then make a profit. The Certified Pre-owned vehicles usually have the highest trade-in prices because they have been certified against manufacturer checklists to meet certain quality levels. This often involves multi-point inspections, changing certain fluids and consumables like wipers, and sometimes even replacing the tires or brakes. These quality controls are some of the benefits of buying a certified preowned car.

Other great ways to compare prices are,, CarMax, Craigslist, recently completed Ebay auctions, and other online sources.

You’re ready to go car shopping once you have a rough idea of your car’s private resale value and trade-in value.

Pros and Cons of Private Sales

Pros – price. You can usually get the best price if you sell your used car to another individual as opposed to trading it in or selling it to a dealer. It can often be easier to negotiate with an individual and on your own time line versus negotiating with a dealership on a short time line.

Cons – it’s a hassle! Selling your car privately can be a hassle. It take a time and energy to sell your car. You will need to take pictures of it, write down the specs and other details, list it online or in the classified ads, and be ready to answer numerous phone calls and questions. Then you have to deal with test drives, tire kickers, low-ballers, negotiations, etc. You also need to be aware of potential scams or thieves (some people who take you car for a test drive may never return, offer to pay with a rubber check, etc).

Tips for selling your car privately. Be prepared to be flexible on the price and with your availability to let people look at it. Only accept cash or a cashier’s check from a local bank, and preferably if you are there when it is printed. Craigslist is a great place to list your car for free. You can also list your car on Ebay, but be prepared to pay a listing fee. The added benefit is being able to reach a much larger market. This can be invaluable tool if you have a rare car or live in a small market.

Prepare your car! You might be surprised by the number of people who don’t take the time to clean their car before listing it for sale. Cleaning your car thoroughly, inside and out, before taking photos and listing it for sale is always a wise investment. These additional tips can help you get the most value out of a private sale.

Be on the lookout for scams! High ticket items are a target for online scams. Be careful accepting money orders or checks from someone over the internet unless it is someone you know and trust. Another popular scam is someone buying the car or other high ticket item and requesting you to ship it. The buyers will often offer to send you a check for more than your asking price to cover shipping and “your time.” They have your car or other item by the time you find out the check was fake.

Pros and Cons of Trading in Your Used Vehicle

Pros – quick & easy, and potential tax benefits. The biggest benefit to trading in your car is saving time and the hassle of selling your vehicle by yourself. There may also be tax benefits for trading in your car. In most states, when you trade-in your car when purchasing another vehicle, you are only required to pay sales tax on the difference between the trade-in value and the price of the new car. (See below for a break-down showing how you can save money by trading in your vehicle).

Cons – usually lower selling price. You may get less for your trade-in than if you sell it privately. Even with the tax breaks mentioned above, you may find that you will still make more money by selling it on your own. It’s best to run the numbers to see what you would have to be able to sell it for privately to make it worth your time and energy. In come cases it will be close, and in others there is a clear advantage to selling it on your own.

Tips for trading in your used vehicle. Negotiate trade in price separately from the purchase price of your new(er) vehicle. A favorite dealership trick is to complicate negotiations by negotiating both the purchase price of the vehicle you are buying, and your trade-in at the same time. Some dealership will also quote you a very low price on your newer car, knowing you will be happy with the price—then they will undercut you on the trade in. Negotiating each price separately makes things a little easier to track. You should also thoroughly clean and detail your car before taking it to the dealership for a trade-in. A clean car may get you a better price.

Tax Benefits of Trading in Your Car

Let’s look at an example that explains why I believe it can be better to trade in your car:

Without Trade-in:

  • New car purchase price: $30,000
  • Taxes paid (7% of $30,000): $2,100
  • Used car sold by owner: $16,000
  • Total cost of new car: $32,100 – $16,000 = $16,100

With 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 – $30,000
  • Trade-in Value: $15,000
  • Taxes Paid (7% of $15,000): $1,050
  • Total cost of new car: $31,050 – 15,000 = $16,050

I admit, these numbers work perfectly, but you will 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.

How to Estimate Your Car’s Value

All of this is just theory unless you know what your car is worth. Edmunds offers a great car appraisal estimator.

Using their tool you can enter details about your vehicle and get a good estimate of what you can expect to get from both a trad in and private party sale. It’s really easy to use and even lets you pick paint colors and packages for the vehicle you are driving.

Is Trading in Your Car Always Better?

No. Sometimes the dealership will only be able to offer you an auction price, which will likely be much less than you would be willing to accept. 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.

The last time I bought a new car, I traded my old car in. I estimate I could have made an additional $1,000 on the sale price vs. trade-in price, but after the tax considerations, the total difference would have been in the ballpark of $500. I had other reasons to trade-in as well – I lived in a small town at the time, and actually drove several hours to a large city where I saved well over $1,000 on the price of my new car. That savings more than made up for the difference of trading my old car in.

Trading in your car can save you time and money. When you trade-in your car, the deal happens that day. You do not 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.

The 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.

Do you have any tips for either selling your vehicle privately, or for getting the most value on your trade-in?

Get Instant Access
FREE Weekly Updates! Enter your information to join our mailing list.

Posted In:

About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

Reader Interactions


    Leave A Comment:


    About the comments on this site:

    These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

  1. Eric says

    We had to fight the dealership to get what we felt was a fair deal on our trade-in. I do believe we could have gotten more if we sold it on our own, but it was easier just to get it taken care of at the dealership.

    Good point about the tax implications. I hadn’t thought about that. Probably best we did trade it in.

  2. Ryan says

    Eric, I agree, it can be a battle to get fair value on your trade-in, but if you can get good value, then the tax implications and less hassle make it well worth your while.

    A lot of people don’t know about it, but the Kelley Blue Book also has a companion, the Black Book, that only dealers have access to. One of my friends who worked at a dealership let me know exactly what I should ask for my trade-in. The dealership I trade my car in didn’t want to give me that much, but finally decided to do it.

    I’ll write about the purchase in an upcoming article.

  3. Chief Family Officer says

    Thanks, Ryan! You make an excellent point that I hadn’t even considered – it makes it that much easier for me to go with the trade-in and not feel bad for not wanting to deal with the hassle of a private sale 😀

  4. Ryan says

    Hi CFO, I think too many people focus on the final trade-in/sale price of their old car vs. the effective value they receive.

    I would still do an analysis for each situation, but you may find that the effective value you receive after tax considerations just make it easier to trade the old car in.

  5. Sandee says

    Great post. I never realized that you only pay taxes on the difference between the new car and the trade in. Besides the Black Book, there is also another book that many dealers use called the NADA (National Automobile Dealers Association).

    Sometimes, depending on the situation it makes sense for a person to donate their car instead of selling it or even trading it in. Some charities allow you to write off the full market value of your car on your taxes when you donate it. It won’t get you cash in your pocket up front but it might be a good option to consider if you think you will end up having to pay when tax time rolls around…

  6. Blair MacGregor says

    Timely article Ryan. I’m actually wrestling with this decision right now; I bought myself a nicer car a few months ago but I need more cash available to put into my business so I’m thinking of selling it and going out & picking up a cheap car that I can just pay cash for.

    The one dynamic that’s different from the other times I’ve bought/sold cars is that this is the first car I actually took out a loan on; I’m sure this would probably make the selling it yourself route an even bigger hassle, but I’m going to have to do some more research.


    • Ryan says

      Having a loan makes a difference on whether or not you can sell it privately or trade it in. It’s hard to sell it privately if you are upside down on the loan, unless you have the cash to make up the difference.

      Best of luck with your decision and your business venture!

  7. Kevin Khachatryan says

    Let me tell you: never trade in your car. Dealers will do almost anything to low ball you and drive down what they are paying for. I have 2 car dealers in the family and sometimes I am amazed at how much they pay for trades: almost aways 50% of the car’s value.

  8. Kyle C. says

    Speaking from extremely recent experience, as in Friday of last week, it was a ton better to sell my car privately. Both the dealer and CarMax were only willing to give me $4000.00 on trade. I was able to list it privately and get it sold within 3 days for $6000.00. That was $2k more than I would have got at the trade in and well worth the hassle of driving out to meet somebody for a test drive.

    • Ryan says

      Thanks for sharing, Kyle. I’m pretty sure this is the route we are going to go. KBB lists a $2,000 difference between trade-in and private party value and I wouldn’t be surprised if the actual difference ends up being more.

  9. Daddy Paul says

    Selling the car privately is a good deal for the buyer as well as the seller. I found putting the car up for sale down at the corner (bring it home nightly) is the best way. I get too many fruitcakes from craigslist and the local paper.

    • Ryan says

      We’re going to have to go the Craigslist route. Unfortunately, we don’t have a good place nearby we can park our car for the day.

  10. Milliver's Travels says

    My husband and I are having this exact conversation right now. I want to free up some extra money on the monthly budget to help pay down credit cards more quickly. The fastest way I can see of doing that is by getting rid of (or at least lowering) the highest of our two car payments.

    We ran the numbers in the blue book and compared it to what people are asking for our make and model on a popular car-selling site in our state. It looks like we could pay off our car loan plus have several thousand left over for a down payment on a vehicle with a lower monthly payment. That would really be worth the extra time it takes to sell privately.

    It was great to come here afterward and see our thoughts confirmed (about the reasons not to go for a trade-in deal). It was also helpful being reminded that the old car parked at corner trick is still good. Our neighbors sold their car by parking it in the front yard with the bonnet pointed at passing traffic—and we live on a fairly quite street.

    • Ryan says

      Milliver, you could save even more money each month if you were to take the few grand you get after selling your car and use that to purchase a used car instead of using it as a down payment. That would likely free up several hundred more dollars per month which can be directed toward credit card and other debt. It means driving a lesser car for awhile, but it will save you interest on credit cards and interest on a car loan. Then you can buy a nicer car once you pay off your credit cards. Either choice you make will probably end up being better in the long run because you will repay your debt more quickly – which is the first step toward financial freedom! 🙂

  11. james says

    I tried and tried to get the value of my car. I always get other stuff. I have a 2000 Buick custom sedan. low miles, real low. everything OK however: results show 150,000 miles. tried something other, could not get what I needed?

  12. Brooke says

    How would this work out if the trade in value was higher than the price of the vehicle you are purchasing? We are considering trading in our current vehicle, which dealers have offered us $17,500 for, on a vehicle that costs about $14,000. Thanks for the article and any info you have to offer!

    • Ryan Guina says

      Brooke, you should receive a check from the dealership for the difference in value. Keep in mind the dealer will likely quote additional expenses on the cost of the $14,000 vehicle, including things like documentation, dealership fees, registration, etc. But the sales tax may be canceled out. You can also try to negotiate the price of the $14,000 vehicle, and maybe get it for less. Try calling the dealership and asking them exactly how the process would work and what you might expect. If you are concerned about asking the dealership where you will be making the deal, then you can try asking a car salesman (if you know one personally) or you can call another dealership and mention you are considering trading in a high value vehicle for a lower cost vehicle and you want to know how the process works. Hopefully they will be able to tell you what to expect. I hope this helps!

  13. Jasmine says

    Do you know if Ohio is under this law as well? ” In most states, when you trade-in your car when purchasing another vehicle, you are only required to pay sales tax on the difference between the trade-in value and the price of the new car.”

  14. Tim says

    Question? I have a 2012 Toyota Camry dealers are telling me it’s worth 10,000. I owe a little over 14,000 on the car so I’m upside down. Now then for the sake of discussion on their 20,000 new car the trade difference would be my car plus 10,000 to close the deal. Plus I need 4,000 I am upside down to make up the difference. The question here is this if I am coming up with the 4,000 difference that I am upside down why are they rolling the 14,000 payoff back into the price of their 20,000 car? Essentially I am giving them my car for free that they say is worth 10,000, plus they are rolling that 10,000 back into the financing of their car. Their math looks like this.

    20,000 new car
    10,000 trade allowance
    10,000 trade difference
    4,000 neg equity
    6,000 new balance
    14,000 plus payoff
    20,000 out the door

    Should it not be 16,000 financed out the door instead of 20,000?

    • Ryan Guina says

      Hello Tim, I’m not sure I understand the situation.

      It sounds like you want to buy a car that the dealer is selling for $20,000. You owe $14,000 on your trade-in, for which the dealer is offering $10,000. You are willing to pay cash for the $4,000 you are upside down on your trade.

      If that is the situation, then it would seem that you would only owe $10,000 for the new car.

      This is also what you write in your comment, : Now then for the sake of discussion on their 20,000 new car the trade difference would be my car plus 10,000 to close the deal. Plus I need 4,000 I am upside down to make up the difference.”

      So if you are paying the $4,000 difference on your loan, it essentially boils down to their car at $20,000; Your car reduces this by $10,000, and you pay $4,000 cash to settle the outstanding balance on your current car loan.

      Any other math is probably there to confuse you and wrap additional fees into the car loan. I wouldn’t work with a car dealer that is trying to make things more complicated than necessary. I would walk away and find another dealership to work with.

  15. Tomasz says

    Thank you for providing the examples and reminding everyone about having to pay taxes only on the difference between the MSRP – Trade In. However, as you noted it doesn’t always make sense to trade your car in for a new one. Especially, if you car’s been already paid off, you take pride in ownership (keeping up with the vehicle maintenance, regularly cleaning the car) or if you have a vehicle, which is rare, antique or one with only enthusiast following.

    Having said that, there are examples of people losing thousands of dollars by taking the “easy road” and trading in their well taken care of, paid off vehicle. A little effort can produce a difference of $2,000+ by selling the car yourself. I have proven this concept time and time again but I’m different than most people out there in a sense that I don’t mind the work of cleaning the vehicle, keeping the service records, marketing it and going through the payment transaction.

  16. Milford Bill says

    Thanks for the excellent example and “formula” for the computation. You made it very easy for me to release the idea of selling my car for a slightly increased price, which sounds good until the tax considerations are entered. Trade-ins definitely make the whole process simple and quick.
    Nicely done for a non-financial car shopper/buyer.

Disclaimer: The content on this site is for informational and entertainment purposes only and is not professional financial advice. References to third party products, rates, and offers may change without notice. Please visit the referenced site for current information. We may receive compensation through affiliate or advertising relationships from products mentioned on this site. However, we do not accept compensation for positive reviews; all reviews on this site represent the opinions of the author. Privacy Policy

Editorial Disclosure: This content is not provided or commissioned by the bank advertiser. Opinions expressed here are author’s alone, not those of the bank advertiser, and have not been reviewed, approved or otherwise endorsed by the bank advertiser. This site may be compensated through the bank advertiser Affiliate Program.