It is a commonly held belief that a private party will pay more for your trade than a dealership.
In reality that depends on what type of car you have. I would say this, if your vehicle is worth less than $10000 and you have the energy to try and sell it on your own you will probably get more money from a private party. If your vehicle is worth less than $5000, you will almost definitely get more.
Be warned, trying to sell your car on your own to a stranger is a difficult thing to do. However, if you have a friend or family member lined up that often works extremely well.
One of the reasons not to sell your vehicle to a third party you will miss out on tax savings (you will only have to pay taxes on the difference of the sales price of your new car and the value of your trade). Those savings can only be given if you sell your vehicle to the dealership you buy the car from, and in Texas you save $625 in taxes for every $10,000 your trade is worth.
Also, the transfer paperwork is time consuming process and unless the person you sold to registers the vehicle in a timely manner, they could potentially be driving around in a vehicle for which you are still responsible.
Is it possible to get all of the following:
- A higher, private party value for your trade
- Tax savings
- Certainty that the transfer of your old vehicle is done correctly
It actually is, with a technique savvy customers use called an “In and Out”. This is how it works:
Determine with the other party how much they will purchase your car for.
- Inform the dealership that you want an “In and Out”, if they do not use that lingo tell them you want to sell your trade to another customer with the dealerships help.
- You sell your vehicle to the dealership at the price you and the third party agreed upon, so you still get tax savings.
- The dealership then sells the vehicle to the third party at the agreed upon price.
- The dealership will handle the paperwork for both parties.
Why is this better? You get the tax savings of course, but transferring a vehicle is a lot of work, and private party sales mess it up all the time. When you leave the dealership your new vehicle will be titled in your name and your old vehicle will be titled in the third party’s name, and it will all be taken care of by the dealership staff that handles paperwork every day.
The “In and Out” process can be a bit tricky. As a salesperson I used it all the time and ended up selling 2 cars in a day instead of 1. Ask your salesperson and their manager if you are in the correct position to take advantage of this technique.
What are the downsides? The dealership usually adds a fee for doing this: It was $299 where I worked. The dealership will also collect taxes and licensing, and are required to charge a document fee as well. So it you are trying to avoid tax and fees, (example: a family member to family member transfer of a car) an “In and Out” might not be the best idea.