Most new car buyers know that they’ll get more for their trade if they sell privately rather than trade with a dealer. But selling your own vehicle can be a hassle:
- placing the online ads
- taking phone calls and emails
- showing the car, including test drives
- negotiating price
- completing the paperwork
Unfortunately, the economic downturn is forcing more car owners to sell vehicles privately so they keep more hard-earned cash in their pocket. If you find yourself trying to decide if you should sell privately or trade with a dealer, it may be useful to know how much more it will cost you to work with a car dealership.
2007 Toyota Camry LE sedan
Let’s assume you own an ’07 Camry that’s in excellent condition. The figures I’m going to reveal are not a secret. They are readily available on Kelly Blue Book’s website kbb.com. Look for:
- Trade-in Value: The value a car dealer normally allows on a trade.
- Private Party Value: The actual selling price when sold privately in your area.
- Suggested Retail Value: The initial asking price at a car dealership. This price does not take into account negotiations, sale prices, discounts, and so on.
- Certified Pre-owned Value: The initial asking price at a dealership for a certified pre-owned (CPO) vehicle before negotiations, sales prices, and discounts.
Using the values outlined on kbb.com, a dealer will hope to allow $12,575 for your Camry after negotiations. Dealers normally offer a much lower figure initially. If you aren’t a competent negotiator, or if you don’t come prepared with your own research—or both—you may get less than this figure. Or, if you know how to hold out for more money, you could get more.
Yet, if you sell privately you can expect to get $14,225. Subtract the trade value of $12,575 and this means that choosing to trade your car rather than sell it privately cost you $1,650.
Just for fun, let’s see how a dealer could benefit if they took your vehicle on trade. If they allow $12,575, they’ll turn around and try to sell it for the Suggested Retail Value of $16,175 and will hope to make a gross profit of $3,600. However, this does not take into account the cost to get the car ready for sale, which can run from a few hundred to a few thousand dollars. If preparation costs run over the expected amount, a dealer may try to set the initial asking price higher, hoping to recoup his extra costs.
If the dealer wants to certify your trade prior to selling it, they usually pay a fee to the manufacturer. This makes sense, because it’s the manufacturer—not the dealer—that provides the extended warranty. The Certified Pre-owned Value—or the dealer’s initial asking price for a CPO vehicle—is $16,625, or just an additional $450 over and above a dealer's non-certified price.
One reason I recommend CPO vehicles is that even though each manufacturer offers different terms and benefits to their CPO program, there is normally more than enough value for money spent to justify the extra cost. Also, none of the benefits of a CPO program disappear no matter how a good a deal you negotiate.
Sell privately or trade in with a dealer? There are so many variables, we each have to make that decision based on our individual circumstances. However, it may help to know a practical negotiating tactic that can be used when either buying a car or negotiating the price of your trade. See Negotiating Your Car Deal: Be Prepared To Stand Up and Walk Out.
L. James Johnson is the guy who wrote the book on how to sell your car online: HELP! I Gotta Sell My Car NOW! New Rules for Selling Your Vehicle Online! is available on Amazon.com.