Automotive Loans: Trade In or Sell a Car?

(2/7/2013) If you're purchasing a car to replace your current car, you face a choice — trade in or sell outright?

Trading in a car involves bringing it to the dealership and offering it as part of your purchase price. The dealer will examine your car and specify the amount they will pay you, which can then be used as part of the down payment for your next car.

There are distinct benefits to trading in a car:

• Simplified process. When trading in a car there's no need to advertise, field disparate offers, and take excessive time out of your schedule. There's no need to worry about the intricacies of title transfer and other ownership issues. You simply bring the car to the dealership on the day you wish to purchase your new car. Once a price is negotiated the dealer handles the entire transaction.

• Reduced loan. Using a trade in can significantly increase your down payment, which reduces the amount you need to finance. This will save you money in the short term on monthly payments, and over time in the form of interest.

• More options. If you're still financing a car you wish to sell, dealers are far more equipped and likely to take the trade. They'll contact the lender and pay off the balance, ensuring a smooth transition.

• No takebacks. When trading in, the dealership assumes all responsibility for the vehicle and mechanical issues. Whereas a private buyer may try to seek additional money after the fact if an issue comes up, once you leave the dealer you will not be contacted about the car again.

Another option available to car buyers seeking to sell their current car is to sell outright. This will involve advertising the car and seeking a private deal. There are definite benefits to this route as well:

• Better deal. The price offered by dealerships on trade ins is often less than what owners can get through private sales. Their goal is to obtain the car at a discount, counting on the convenience offered at their dealership to get people to agree to lower purchase prices.

• More options to buy. By selling privately, you can shop at any number of dealerships. Trading in will typically restrict your purchase to that specific dealership.





Other related articles:

Automotive Loans: What Laws Protect Car Buyers?

Automotive Loans: Determining a Down Payment

Automotive Loans: The Truth About "Add-Ons"

Automotive Loans: Negotiating a Loan with a Dealer

Automotive Loans: How Much Car Can You Afford?

Automotive Loans: Buying Vs Leasing

Automotive Loans: Applying for a Car Loan

Avoid advertised auto trade-in, loan pay-off rip-offs

Auto sales, loans hit the speedway

High MPGs and low auto loan rates can save you thousands of dollars

Research your options when shopping for an auto loan

How to drive a hardauto loan bargain

Special Report: Hitting the Brakes on Auto Dealer Loans

Buying vs. Leasing: A Comparison

Closed End Lease or Open End Lease

Amy Lillard A frequent contributor to ERATE® since 2006, Amy Lillard is a freelance writer specializing in turning complex information into useful tips and tricks for readers. For questions or topic suggestions, contact Amy at [email protected].

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