So you are ready to get into a new vehicle but you are still on the fence about how to get rid of your current car that you want to replace. Most people want to sell their cars and use the money to put down on the new car. There are two ways that you can sell your car. You can choose to take it within your own hands and privately sell it through the newspaper, the web or in your driveway or you could choose to trade in your old car to the dealership and not have to worry about selling arrangements.
The question I hear many people ask is; will I get more for my car selling it privately or trading it in?
In reality, yes you will always get more money for selling your car privately than trading it into the dealer. You may now be asking yourself why anyone would want to trade in their car when the dealer is giving you less than what you can really get for it and why is the dealer giving me less than what I can get for it selling it privately?
Dealerships purchase vehicles at whole sale prices other than retail prices. Just like any business selling a product or service they always have a cost benefit of being a dealer of that product or service and therefore purchase these items at a wholesale price. In order for a business to make any type of profit they need to sell the product or service for more than what they paid for it and therefore is the retail or market price.
Same idea goes for a dealership. When a customer is looking to trade in their vehicle, a dealership will always provide the customer with a wholesale trade in value rather than a retail value. If you can get more money for selling your vehicle privately, we do support that choice and understand why a customer would want to do that but let’s take a look at some of the advantages there are when trading your vehicle into a dealership versus selling it yourself privately.
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Trading Your Vehicle |
Selling Your Vehicle Private |
Example Cash Transaction:
MSRP= $30,000 Selling Price before taxes= $22,000 Selling prices after taxes @ 13%=$24,860 Total Taxes Paid= $2,860 |
Example Of cash transaction: MSRP: $30,000 Selling Price before taxes= $30,000 Selling Price after taxes= $33,900 Total Taxes Paid= $3,900 *Without having any trade in, you will pay an additional $1040 in taxes |
Trading your vehicle in vs. selling it privately yourself really has some great benefits but it is up to you as the customer to decide if this is value to you. Some questions to ask yourself before deciding whether to sell your car privately or trade it in might be:
- Do I want to deal with the hassle of finding a buyer for my car?
- Do I want to wait to find a buyer for my car before I buy my new one?
- Do I want to take time out of my days to meet with interested buyers?
- Do I want to have to safety and e-test my car or sell it “as is” and get less for it?
- Do I really want to have to negotiate with strangers about the selling price?
- What will the buyers financial method be?
- Am I okay with taking a little less for my car and saving on taxes?
- Do I want to go to the MTO and pick up a Used Vehicle Package?
- Do I want to deal with all the legal paper work when transferring the ownership?
- Do I want my new car next week or next month?
These are some questions that may help your figure out how you really want to handle selling your vehicle. I know many people want more for their vehicle, who wouldn’t but when you take all the factors into consideration it can sometimes be a drag to sell your car privately especially if it isn’t the most desirable vehicle on the market. The dealer may tell you that he will give you $8,000 for your trade in but you could get an extra $2,000 selling it privately giving you the option to put a $10,000 down payment instead of $8,000 trade. Well if you take the above example into consideration, will you really be getting an extra $2,000 for privately selling your vehicle? Let’s take a quick look…
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Trading Your Vehicle |
Selling Your Vehicle Private |
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Example of a strict cash transaction: MSRP= $30,000 Selling Price before taxes= $22,000 Selling prices after taxes (13%)=$24,860 Total Taxes Paid= $2,860 |
Example of a strict cash transaction: MSRP: $30,000 Selling Price before taxes= $30,000 Selling Price after taxes (13%)= $33,900 Down Payment= $10,000 Effective Price= $23,900 Total Taxes Paid= $3,900 Total Savings= $960 ***In reality by selling your car privately and getting $10,000 for it instead of a trade in value of $8,000 you are actually only saving $960 rather than $2,000***
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These numbers can be confusing sometimes but because a trade in value is deducted before taxes and a down payment is deducted after taxes you will end up paying for the full amount of HST on the selling price of the vehicle even if your down payment is larger than your appraised trade in value.
I recommend doing some number crunching before deciding to trade in or sell your vehicle privately. I would also recommend you consider your time as value and decide on the combination of your time and money whether you would prefer to trade it or sell it.
If you have any questions please feel free to post a comment and I will get back to you in a timely manner or you can call directly to our dealership at 905-895-4661 or toll free at 1-866-980-9412.
