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Selling Your Car – Privately or to a Dealer?

Determining whether to trade your car at a dealership or sell it privately is an important decision. Depending on the car in question, the difference in dollars you receive could be substantial.

Your first step should be to evaluate your current car situation. Ask yourself these questions.

  • Do you owe money on your car?
  • Is it a "desirable" model?
  • What the condition of your car?

If you do owe money on your car, call your bank for a payoff amount. This number is going to play a huge role in your decision making process going forward.

The term "desirable" varies depending on the current market. For instance, when gas is expensive and the economic market is in a downturn, hybrid or economical cars are desirable and gas guzzlers such as a Hummer are not. However, a few years ago, large cars were moving off dealership lots steadily and buyers were willing to spend more for a larger car.

Next, look at your car with objective eyes. Take note of dents, scrapes, windshield dings, paint, and cleanliness. But also take a deeper look. When did you last service it? Are the tires in need of replacement? Does it make funny noises? How about the condition of the brakes? How many miles are on the car in relation to years? Do you have documentation for services and repairs you have done? Has it ever been in an accident? Be prepared to answer all these questions and more regardless of which way you decide to sell it.

Depending on the part of the country you live in, there are different value guides used by the automotive professionals. The most common are Kelly Blue Book, NADA and Black Book. The values you’ll find are not written in stone and certainly you know that the only way the car is worth what’s listed is if someone is willing to pay it.

If you owe money on your car and the amount you owe is more than the value you determined, that is most commonly called being "up side down". If you have the cash to make up the difference, then you are in the driver’s seat. If not, your decision whether to trade or sell privately really has just been made for you. The only way to make up the difference if you don’t have the cash is to trade the car and let the dealer add the negative equity to your next purchase. This isn’t the best scenario, but unfortunately very common.

On the other hand, if you have the cash or you have equity in your car, you may consider selling privately. It is possible to get more money for your car in a private party sale since you are taking the middle man (dealer) out of the equation. You do need to realize, however, that if faced with the exact same car, with the same price, a buyer is more likely to go to a dealer to purchase than to you.

Therefore, it needs to be beneficial to the buyer to buy from you. You could offer an extended warranty (you can buy it from a dealer or transfer your existing one), offer a great price, or even an incentive like a free gas card. You want to be priced at the lower end of your competition to get buyers interested in your car.

In addition, selling to a private party can be a hassle and downright dangerous. Be sure you are aware that strangers will be calling you at all times and coming to see your car. Have plenty of pictures and a great description of the car. It’s always an option to try to privately sell and if it’s not working out then you could decide to trade.

When trading your car in, you will probably get less for your car. The up side is that you won’t have to hassle with the selling process, go to DMV, get your car smog tested (if necessary), answer the phone and meet to negotiate with strangers.

Still undecided? Take your car to a couple of dealers and ask them what they would pay you for it. Go to dealerships that carry the brand you are selling. Also try the dealership where you want to purchase your new car. You will know after going to at least three what the average value to a dealer will be.

The bottom line is this: there is no right or wrong answer to the question of whether to sell privately or trade your car to a dealership. Making an informed decision is the key to making the right one.