If you've been looking for a new vehicle, you've probably been thinking about what to do with your current car. You might be torn between trading in your vehicle to a dealership or selling it to a third party. Both are reasonable options, but knowing which choice is right for you can be difficult.

Before you make a decision, you should weigh the benefits of each option. You might have set your heart on selling the family car to a third party, but the dealership could ultimately offer benefits beyond your financial expectations. Here's what you need to know before you decide to trade or sell your vehicle.

Trading In Your Car Is Simple

Although you may receive more money if you sell your car to a third party, trading in your vehicle is incredibly simple. If you no longer want your car when you purchase a new one, you can bring it to the dealership and let a professional evaluate it. You'll leave the car at the dealership when you drive home your new vehicle, and the rest is history. The dealership may spruce up and sell your car, send it to the auction, or use its parts. One thing is certain: it's no longer a burden you have to worry about.

Selling Your Car Is a Little More Complicated

Of course, you aren't going to have the same simple experience if you decide to sell your car on your own. You may have to place advertisements, put your phone number out there, and let people test drive your vehicle. This can be uncomfortable, not to mention that it takes up a lot of your time.

For instance, somebody might call you to set up an appointment to test drive your vehicle. The other party might drive it for 15 minutes, ask questions for another 10 minutes, and ultimately decide that they do not want to buy your car. You could go through this multiple times before you find a buyer. This can be disappointing, considering all the time you've put into the process.

You Can Use the Trade-In Value

You may also find it beneficial to use the trade-in value as part of your down payment on your new vehicle. While this value may not be as high as it would be if you sold your car to another person, this is still money you can use now.

For example, let's say you still need to use your car as you shop for a new vehicle. You may not have the option of selling it ahead of time to use the cash for your new vehicle. Trading in your vehicle is the next best option, helping you pay off your new car faster.

Selling Your Car Lets You Pick Your Price

If you want to ensure that you receive your vehicle's full value, selling it is wise. For instance, you might have a nice car with sentimental value and want to ensure that you get exactly what the car is worth. When you list the car on your own, you have the power to choose the price. Even if it is higher than other cars on the market, you can wait for the buyer who will pay exactly what you expect.

You May Pay Less Tax If You Trade It In

Trading in your car means that you might end up paying less tax. Often, you only have to pay the difference between your trade-in amount and the cost of the car you are buying. This can be quite a savings, depending on how much your trade-in vehicle is worth. Keep in mind that Alabama's state sales tax for vehicles is currently 2%, but each county or city can add more to this figure. Check with the dealership to be certain about the sales tax rate before making a decision.

For instance, you might purchase a new car from a dealer for $30,000. Let's say that you trade in a vehicle worth $5,000. That means the balance owed is $25,000. The sales tax will apply to that $25,000 rather than the $30,000, which could save you a lot more money than you think. If you want to figure out how much money you can save, multiply your state's sales tax by the cost of the car, with and without a trade-in.

Trading In Can Help You Pay Off Your Car Loan

You may wonder if you can trade in your car if you still have a loan on it. While you can certainly do this, you need to consider whether it is a good idea or not. The good news is that if the car has more value than what you currently owe on your loan, the difference may apply to your new car. If you still have a loan that is higher than the car's value, you may find that trading it in will not be helpful.

Keep in mind that you may also be able to roll any negative equity from your previous car into your new car loan. This is a convenient option, but this also means that you could end up paying more interest than you would otherwise. You do not want to make this decision without doing the math first.

Each Option Has Its Benefits

As you can see, there are times when trading in your vehicle is obviously the right option. If you have a lot of positive equity in your vehicle or simply want the ease of transitioning from one car to another, trading in your vehicle may be the perfect solution. Consider each of these factors as you decide what it is that you want from the transaction.

At Tameron Buick GMC, we know that your car can feel like an extension of your family. You spend a lot of time in your vehicle and also invest a lot of money into your vehicle. If you're ready to check out options for trading or selling your vehicle, check out our inventory and see if trading in your vehicle would benefit your family. For more information, visit our finance center and contact us today. 

Buying a Car by Pictures of Money is licensed with CC BY 2.0

Categories: Finance
Tags: sell, trade in