Ep.6 Trading in a Car vs. Selling It

Trade-In vs. Selling Your Car: A Woman's Guide to Making the Best Decision

In this episode of Women Buying Cars, host Meredith Reynolds guides listeners through the pros and cons of trading in a vehicle versus selling it independently. Meredith explains the trade-in process, factors that affect trade-in value, and the benefits of trading in, such as convenience, savings on interest, and potential tax breaks. She also discusses the potential financial gains and challenges of selling a car privately. Additionally, Meredith shares her admiration for the Jeep Grand Cherokee, highlighting its features and versatility. The episode aims to empower women with the knowledge to make informed decisions at car dealerships.

00:00 Introduction: To Trade or Not to Trade
00:41 Understanding the Trade-In Process
02:37 Evaluating Your Car's Worth
05:28 Pros of Trading In Your Vehicle
06:04 Financial Benefits of Trading In
07:56 Tax Breaks and Legal Considerations
09:37 Cars I Love: Jeep Grand Cherokee
12:50 Pros of Selling Your Car Privately
14:13 Alternative Selling Options
15:20 Conclusion and Final Thoughts

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Transcript

Meredith 0:01

I'm pretty sure it was William Shakespeare who said, To trade or not to trade, that is the question. Today we'll be discussing whether you should trade in your vehicle, but we will not be discussing English literature. On Women Buying Cars.

0:19

You're listening to Women Buying Cars, and I'm your host, Meredith Reynolds. I'm a former teacher turned used car dealer, and I'm here to teach and empower women to walk into a car dealership with confidence and walk out with the car that's right for them.

Meredith 0:35

Hello everyone and welcome to Women Buying Cars. I'm your host Meredith Reynolds. Thank you so much for joining me today. We are talking about selling your car versus trading it in. Before we get to that, let's talk about how the trade in process works. So if someone were to come in and buy a car from us and want to trade, we would drive the car to start with and get a feel for whether or not we think it needs a lot of work. So is the transmission slipping? Does it feel out of alignment? Are the brake pads worn out? Lots of other things like that that are obvious when we drive the car. We're also going to look over it very thoroughly. How many dents and scratches? Does it smell like smoke? Do the windows go up and down? conditioner and heater work? All those kind of things because If we find those things, we will most likely need to fix them before we can sell the car. So that's going to change how much we're willing to pay for the car. It's easy when you're a driver to just get used to seeing that little scratch in the back and forget it's even there. Or you just know that the back window is wonky and you just work around it. But those are things we would have to fix in order to resell your car. So we're going to be looking over that really carefully. Then we take the information on the car, the make, model, the year, the mileage, The condition and we put it into a program that we pay for and that program analyzes other vehicles that are similar in this area to see what other dealers are charging and then gives us a suggested range if we want to sell this car in our market. and make a profit and put X amount of dollars into it, we would need to buy the trade at this amount. We really rely on that program and find that it's very accurate. If you are looking ahead of time on what you think your car might be worth, you may find a wide variety of ideas. You can go to places like Kelly Blue Book and Edmonds and CarGurus. There's a lot of different places that will tell you the value of your car. And if you went to a few of them, you probably would not get the same number. It can give you a ballpark, but that doesn't mean That's the number you're going to get.

3:06

Remember, these third party websites have not actually seen and driven the car, so the numbers may not match up. They also are not always exactly accurate for the market in the city that you're in.

Meredith 3:21

make sure you are looking at the trade in value. It will be much different than the private party or retail value. Just as an experiment, I put in a car, it's actually one we just have on our lot, and I put it into one of these programs to see what kind of numbers it would give me. This is a 2016 Acura MDX. The trade in value was around 10, 600. Private party sale, meaning you sell this car on your own. On Facebook marketplace or wherever, $13,300. So we've gone from ten six to 13 three, so pretty big difference. And then the dealer price. Is 15,245. So trade in ten six. Private party sale, 13 three. Dealer 15 2. That's a really big difference. The reason the trade in value is so low is because, like I said, we would have to invest some money in this car to get it ready. Most people have not put on brand new tires right before they sell their car. Most people have not put in a brand new transmission right before they sell their car. So those are things that we potentially need to pay for. Then we're going to sell it for a profit. That's our job. That's how we make a living. Buying a car, fixing it up, and then selling it for a higher price. It takes quite a bit to get a car retail ready when it's a trade in. We're touching up paint, we're changing the fluids, we're detailing it, and we're fixing mechanical issues. Also keep in mind, that the offer you get on a trade in is what it's worth to that dealer. And the particular dealer you're working with may not have a market for the type of car you want to trade in. So that car may not be worth as much to them as it might be worth to someone else or what you found online. Let's start talking about the pros of trading in your vehicle and then we will get to the pros of selling it on your own. Number one, the car is out of your hands and out of your hair right away. You don't have to deal with it anymore. You drive in in one car and you drive out in your new one. You're not trying to deal with people who are interested on Facebook. You're not answering a million inquiries. You're not going to meet someone and they don't show up. It's very easy and it's off your hands. Number two, trading in your car is basically like having a down payment. So,

6:12

I'm going to walk you through an example. For this example, we are assuming that this car has been paid off. Your trade is free and clear. In the future, I will do an episode about what happens if you want to make a trade and you still owe on that car.

Meredith 6:28

let's look at some numbers. If you were to buy a 20, 000 car, and you were offered 5, 000 on your trade, if you are financing, then you are only financing 15, 000 on your 20, 000 car. If you're paying cash, 000 in cash. In the finance example, let's pretend you have a 10 percent interest rate. It's a 20, 000 car. You've got 5, 000 for your trade. So you're only financing 15 at 10 percent interest. Over the course of a five year loan, you would be paying a bit over 4, 100 in interest. If you did not have that 5, 000 trade, if you have no money down, then you'd be financing the whole 20, 000 and over the course of five years, it would cost you about 5, 500 in interest. This example gives us a savings of about 1, 400 in interest over the course of a five year loan. That's a pretty big savings. And that's for people with a 10 percent interest rate. If you have poor credit, if you had a 20 percent interest rate, you'd be saving 3, 700 in interest. So anytime you can bring down the principal you're going to be saving a lot of interest. The third reason to trade in your car Is that in my state of Kansas, you're going to get a tax break. As I've said in many episodes before, when I talk about money and taxes and anything legal, you have to check with your own state because each state does it differently. Here in Kansas City, we straddle Missouri and Kansas and both have different laws. So in Kansas, you're going to get a tax break right then and there when you trade in your car. We take the value of the trade in, subtract it from the price, and you're only paying tax on the difference. So that 20, 000 car, you have a 5, 000 trade in, you're only financing 15, 000. In Merriam, Kansas, we have a high sales tax rate. 9. 475. So where I am, a customer would be saving 474 in taxes right away. The person with the 10 percent interest rate is saving. Just shy of 1, 400 in interest, plus about 470 in taxes. that's a big savings right there. In Kansas, if someone were to sell the car on their own, they don't get a sales tax break. So that is a really big difference. Like I said, we straddle Missouri and Kansas. On the Missouri side, someone who sells the vehicle on their own would get a sales tax break. So please investigate this for your own state. Now we've come to a part of the show I like to call Cars I Love. The car I love today is the Jeep Grand Cherokee. I absolutely love the Grand Cherokee. First of all, because it has a very classic style. When I see a Jeep Grand Cherokee on the road, I know exactly what it is. When I see an Acura or a Chevy or a Ford midsize SUV on the road, I don't necessarily know what it is until I see the emblem. But there's something about that Jeep Grand Cherokee, even if it's several years old, I can still tell what it is. It's very recognizable. It looks very rugged yet refined. Another reason I love the Jeep Grand Cherokee is because they have really nice interiors. The front seats are substantial with soft leather. And a nice big cushy seat makes a big difference when you're driving, especially if you have to drive a lot. I think Jeep Grand Cherokees are a great size. They have a lot of interior room for the driver, passenger, and cargo. It's a two row SUV, and that gives you a lot of space in the back, while keeping a lot of space for all the people in the car. Even though a Jeep Grand Cherokee usually is a four wheel drive, they do make some rear wheel drive. But most of them we find are four wheel drive. In the snow, here in Kansas City, a four wheel drive can be the difference between getting to work and not. And the Jeep Grand Cherokee goes through the snow like it's nothing. Now there are a lot of different trim levels. But several of the trim levels have heated seats, heated steering wheel, and heated back seats. And I always love to see heated back seats. That makes the passengers very happy. I said it was rugged, yet refined. It looks like a car that could go off roading, and then get cleaned up and go to a nice dinner. Very versatile. The body style of the Jeep Grand Cherokee did change in 2022. It became lower and wider. And I'm going to be honest, I prefer the body style prior to 2022. Just a personal preference. Also year they added a three row version. It's called the Grand Cherokee L. And it's going to give you a lot more occupant and cargo space. I recently ran into a friend who purchased a Grand Cherokee L and she says she loves it. The Jeep Grand Cherokee also can come in a hybrid, which is great if you're trying to save money on gas and help the earth. So if you would love a four wheel drive SUV that has a lot of comfort and luxury features, you should consider the Jeep Grand Cherokee. Now let's get back to talking about trade ins. Okay, so to recap the pros of trading in your car, The biggest one is that it is off your hands. You don't have to deal with it anymore. Second, it's like a down payment, saving you interest and taxes. Let's talk about the pros of selling your car on your own. Okay, the number one reason to sell your car on your own is that you can potentially make more money that way. If you are using a website to look up a value for your car, make sure you are looking at the private party number. It's going to be an amount between trade in and the dealer price. That's what you should be aiming for when trying to sell it online. However, you need to be honest with yourself about the condition of your car. Like I said, when you've been driving something a long time, it's easy to overlook. the little things that are wrong with it. But you need to really pay attention to that and think about how that might affect the value. Definitely if you smoked in your car, that's going to bring the value down a lot. And that's essentially the main reason you would want to sell it on your own, but, you should do a little math before you decide to do that, because the savings you get on interest and tax could potentially offset any money you're making by selling it on your own. And then you have to deal with people. You have to be the car salesman. And you don't want to be a car salesman, right? So, my advice is to trade it in. But of course I'm biased. Now a third option we didn't talk about is taking it somewhere and selling it to a dealer that you're not buying a car from. You can go places like CarMax, sell your car, and then come somewhere like Reynolds Automotive and buy a new one. That's not the best option because in Kansas you will not save any sales tax. You save sales tax in Kansas when you buy at the same place you're trading in. So that is not something I advise people to do unless they have something that we absolutely don't want to buy from them and they have no other way to get rid of it. A place like CarMax or WeBuyAnyCar, places like that might be worth it, but it would not be your go to scenario. So sell your car on your own. You get the money up front in your hand. Trade it in. You're getting savings on a cash deal, or you're getting savings in the long run in interest. And of course there's the tax situation. Thank you so much for listening. If you are in Kansas City, please come see me at Reynolds Automotive, even if it's just to say hello. I hope you learned a little bit about trade ins versus selling on your own. Please do me a favor, share this episode with another woman in your life, give me a five star review, and follow the show. Thank you so much, and happy driving.