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After you've made the decision to buy a
new car the question is, "What do I do
with my current used car? Do I trade it
in to the dealer or try to sell it
outright? There are obviously many things to consider when making the decision to sell or trade-in your vehicle.
Working with a dealership versus a
private party can mean less hassle.
Rather than running an ad in the local
paper, setting up appointments with
potential buyers who don't always show
up, and then making sure you actually
get paid for the car, dealership
purchases can run much smoother. The entire car trade-in transaction with a dealership (you're actually selling your vehicle to the dealership) could be wrapped up in an afternoon.
Working with a dealership versus a
private party can also net you more
money. You may be able to sell your car
privately for more money than if you
traded it in. But, you may not "net"
more money because of the higher sales
tax you would be paying for the new car.
For example, assume that your new
vehicle cost $25,000, the dealership is
giving you a trade-in of $15,000, and
the sales tax rate is 7%. You are only
required to pay sales tax on the
difference after the trade-in is
deducted from the cost of the new
vehicle. In this example, $15,000 would
be deducted from the $25,000, leaving a
taxable amount of $10,000. Total sales
tax would be $10,000 times 7% or $700.
If you sold your used vehicle to a
Private Party you would then have to pay
sales tax on the total cost of the new
vehicle. Your tax would be $25,000 times
7% or $1,750.
Thus, if you sold your vehicle to a
Private Party, you would have to get
$1,050 more, or at least $16,050, just
to equal the price the Dealer quoted.
You would also have to add in any
additional costs of fixing up the
vehicle, plus the personal time you
would have to spend showing your used
vehicle. In this particular example, you
would have to sell your vehicle to a
Private Party for at least $16,500
(assuming no additional costs) to make a
small profit.
To help you find the estimated used car trade in value, use the CarQuotes Trade-in Valuations on our Web Site. |