Is it Better to Trade in or Sell My Car?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - September 12, 2019

When it’s time for you to replace your current car, you’re faced with two options: trade it in at a dealership, or sell it outright. Both are viable options, but choosing whether to sell it privately or trade it in comes down to you. If you’re unsure which route to take, we can explain the pros and cons of both so you can make a more informed decision.

Selling vs. Trading in a Car

Trading in a car or selling it privately gets you to the same end goal of getting rid of the vehicle. However, both come with pros and cons; let’s take a look at them:

Pros to trading in – The process is easy and fast. The dealer handles the trade-in paperwork for you, so the process is handled in a timely and stress-free manner. You may also get a tax benefit by trading in your car if your state charges sales tax on the difference between the trade-in value and the selling price of the new vehicle, which also means saving money on the new auto loan.

Cons to trading in – The biggest downside to trading in your car is that you may not get the most money out of the deal. Every dealership has a wholesale guide they refer to when it comes to trade-ins. You can negotiate, but you may still not get the price you’re looking for.

Pros to selling privately – The biggest pro to selling your vehicle privately is that you can sell the car for the price you set. Selling your vehicle above what the dealer is willing to offer gives you more cash to pocket or use for a down payment on your next car loan.

Cons to selling privately – The process of actually selling your vehicle privately can be tedious, stressful, and take a long time. You have to handle the paperwork, talk to multiple potential buyers, put up ads online, and negotiate the price all on your own. You also don’t get the tax credit when you sell it privately, which means you could be missing out on saving hundreds of dollars on the auto loan.

When There’s Negative Equity Involved

Now that you know what your options are, what if you have negative equity in your trade-in? Negative equity is when you owe more on the loan than the car’s actual cash value. Most vehicle owners experience negative equity at some point, and you can’t always get out from under it if you trade in or sell your car.

If you’re trading it in, and you can’t wait until there’s equity, you can pay the difference in cash or, in some cases, roll the negative equity into the new loan. If you’re selling the vehicle privately, you may be able to sell the car for a higher price, eliminate or reduce the negative equity, and cover any remaining negative equity in cash.

The Bottom Line

Whether you want to trade in your vehicle or sell it privately is up to you. One option may work better for you than another. Regardless, you need to make sure your car doesn’t have negative equity unless you’re able to pay the difference when the time comes to trade it in or sell it.

If you’re ready to trade in your vehicle for a new one, or simply looking for a dealership that can assist you with the bad credit car buying process, we can help.

At CarsDirect, we work with a nationwide network of special finance dealers that know how to handle various credit issues. With our help, you don't have to drive from dealership to dealership hoping they have a lender you can work with.

Our process is simple, free, and doesn’t put you under any obligation. To get connected to a local dealer near you for the bad credit auto loan you need, just complete our car loan request form to get started!

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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