If you're thinking about getting a new car, you generally have two options when it comes to selling your old one. You can trade it in to the dealer, providing a nice down payment on your new vehicle of choice, or you can try to sell it yourself. So when it comes to selling a car, which is the better option? We've examined the pros and cons of each decision below.

Trading It In

There are many benefits to trading in your old car, including, most notably, how easy it is. It's simple: You take your old car to the dealer, the dealer makes you an offer, and you put that money toward buying your new car. You don't handle any paperwork, as the dealer takes care of all that. Just drive in with your old car and drive out with your new one.

But there's a major disadvantage to trading in your old car: money. Since the dealer still needs to make money on the car, they won't give you retail value for it -- and they certainly won't give you as much as you could make by selling it yourself. So while you avoid the hassle of selling your car by trading it in, you may lose hundreds or thousands of dollars.

But while trading in your old car won't get you top dollar, money may not be as big of a factor as you think. In most states, sales tax is only calculated based on the difference between the trade-in value of the old car and the purchase price of the new one. That means if you get $10,000 for your trade-in and you're spending $15,000 on a new car, you only pay taxes on the $5,000 difference -- not the full $15,000. While that may not offset the full difference between trade-in value and retail value, it can certainly help.

Selling It Yourself

In almost all cases, you're likely to get more money for your car if you sell it yourself. That's because the next owner won't mark it up like a dealer will -- and that means he or she is willing to spend an amount that's much closer to the car's retail value.

But selling a car on your own isn't always easy. While creating a listing on AutoTrader.com is a breeze, selling your own car means meeting with potential buyers, taking time out of your schedule to give test drives and dealing with banks and finance companies on your own. In other words, selling your own car means there will be extra legwork involved -- and sometimes, it's a lot of extra legwork. As a result, the question you must consider is whether the hassle of selling your own car is worth the extra money you'll get from doing so.

Our Advice

While we recognize that selling your own car can be a difficult process, we think the hassle is usually worth it -- especially since the difference between a trade-in offer and a private selling price is often several thousand dollars. Our advice is to try selling the car yourself before trading it in. If that doesn't work after a few weeks, consider lowering your price, or start thinking about trading it to a dealership.

author photo

Doug DeMuro has a wide range of automotive industry experience, from work at a Ferrari dealership to a manager for Porsche North America. A lifelong car enthusiast, Doug's eclectic vehicle purchases include a Porsche 911 Turbo, an E63 AMG wagon, an old Range Rover and a Mercedes Benz G-wagen.

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