Trade-in versus private selling, which is better?

If you’re contemplating purchasing a new car one decision you might face is whether you should trade in your existing car or sell it privately.

Knowing how car dealers evaluate the trade-in value of your car can help you decide if it’s an avenue worth exploring and which of the two will give you a better value for your car.

What is a car’s trade-in value?

A trade-in value is the price you can get from a dealer if you sell your car to them while buying another new or used vehicle. There are some dealers where you can trade your car for cash, however this is uncommon. Most dealers will use your current car’s trade-in value to decrease the cost of the new car.

What determines the value of a trade-in?

There are many resources online that you can use to gauge a rough estimate of your car by determining its market value.

You can also take it to a dealer to receive an estimate, though this value is more than likely going to be less than the car’s market value. The dealer will take into consideration the condition of your car when quoting you, which is a factor that can’t be accounted for when using an online calculator.

Note that the dealer will keep in mind their profit margin when they sell the car later. A quote from them isn’t binding so it’s advisable to try and negotiate a better price based on your research and knowledge of your car before you commit.

What factors affect the trade-in value?

A car’s make and model isn’t the only thing that determines its value. Other factors that impact its trade-in value include:

• Depreciation: a car will lose value regardless of its make and model though luxury cars will deprecate faster than their non-luxury counterparts.
• Mileage: cars with more kilometres on the odometer will yield lower prices as this indicates more wear and tear. Regular servicing and proper care will help you get a better trade-in value despite the high mileage.
• Colour: popular colours like white and silver will fetch a higher trade-in value compared to brighter or darker colours.
• Transmission: automatic cars are more popular compared to their manual counterparts and will have a higher value.
• Car history: a car with regular servicing and maintenance will land you a better price than a poorly maintained one. Regular servicing is important to maintain the upkeep of a car and record-keeping of services will positively impact its value.
• Market conditions: depending on the car landscape, trade-in values can fluctuate as seen with the used car market during the pandemic. Slow supply chains and increasing consumer demand saw an increase in used car prices. Some models increased their overall value by as much as 30 to 50 per cent.

How to get the best trade-in value?

Before taking your car to a dealership to trade it in, consider doing the following:

• Repair minor issues that are inexpensive to fix.
• Do a thorough internal and external cleaning.
• Have all paperwork ready including service history and registration.
• Visit multiple dealerships to get the most competitive trade-in value.
• Research and understand your car’s value to negotiate the best price.

Trade-in versus private selling

Cars will depreciate regardless of environmental factors and as such it’s tricky to predict how much it will be worth after several years.

While it’s hard to determine the exact price your current car can get whether you sell it privately or trade it in, it’s generally known that trading it in will get you a lower price. While this is not a hard rule, car dealers will want to pay less than the market value so they can sell it for a profit later.

If you sell your car privately you can consider charging the full market price from prospective buyers. However, this doesn’t mean one is strictly better than the other. It will depend on your preferences.

Trading in a car is more convenient and less time-consuming as you simply need to speak with the dealer. A dealer will make the process of selling your car easier but at the cost of you receiving a lower trade-in value.

When selling privately you must put up the car advert and coordinate with potential buyers who want to see it before purchase. You may also need to spend money on inspections and repairs before you sell the car which will lengthen the time taken to sell it.

At the end of the day, it becomes a time versus money decision that you’ll have to make, and one option will be better suited to your preferences and situation.

Consider any debt owing on your car before you decide to sell it or trade it in. It’s best to check with your lender if you can sell it before undertaking any valuations.