Should I Sell My Car or Trade It In?

If you’re ready to buy a new vehicle, one of the best sources of cash for your down payment is your current vehicle. The question is, should you sell it to another individual or use it as a trade-in at the dealership? There are pros and cons to both.

Selling your vehicle to someone else requires more time and effort, but you might make more money. You have to decide if the difference in price is worth the extra work. The state of Texas recommends following these steps when selling a vehicle:

Keep your license plates and transfer them to your new vehicle.

Provide the buyer with all the documents needed to transfer the title:

· A signed title

· A signed vehicle title application

· The vehicle's latest registration receipt

· Any other supporting documents, such as a release of lien, power of attorney, etc.

· Then, accompany the buyer to the county tax office to verify the buyer files a new vehicle title application under his/her name. If you sell or trade in your vehicle to a dealer, or if the buyer can't go to the tax office, you need to notify us of the sale by filing a vehicle transfer notification within 30 days of selling the vehicle.

Dealerships have to factor in the cost of fixing up and re-selling your vehicle when determining your trade value. That doesn’t mean you’ll get less, but it could. And, when you do a trade-in, the dealership does all the work. You just sign on the dotted line.

There’s also a sales tax advantage on trade-ins. When you trade in a vehicle in Texas, you don’t pay sales tax on the full purchase price of your new vehicle. You pay tax on the price difference between your trade-in and the new vehicle. If your new vehicle is $20,000, and your trade-in value is $6,000, you only pay sales tax on $14,000. At 6 1/4 percent, you’re saving $375 in sales tax by doing a trade-in.

To determine the best option for you – sell or trade in - do your research. Go to several dealerships and get a trade value. Find the Kelley Blue Book value of your car and see how it compares to dealer offers. Figure the difference in sales tax and weigh those figures against the amount of time and effort that goes into selling the vehicle. Whether you sell or trade in, you may not get what you want for your vehicle. You will however, be able to make an informed decision on the option that best meets your needs and your budget.