When buying a car, it may be better to have a down payment rather than a trade in. A trade in offers convenience to the car buyer, since one can walk into a dealership with a used vehicle and walk out – or rather, drive out – with a brand-new automobile. But this convenience comes at a significant cost, since most buyers are likely to leave cash on the table by receiving less for their trade in than what it is worth. The dealer is likely to offer an even lower price if the trade in is from a car manufacturer that is different from the one the dealership represents.

The preferred course of action would be to sell the car privately before buying a replacement vehicle and using the sale proceeds as a down payment. But arranging for a private sale can be a time consuming and cumbersome process involving a number of steps. These include ensuring that the vehicle is sale worthy and advertising the sale, to making the car available for test drives and ensuring the full sale proceeds are received once the car is sold. The timing also has to be near perfect in a private sale, in order to avoid being without an automobile for an inordinately long time.

When comparing a trade in to a private sale, then, it boils down to how much the convenience factor is worth. Receiving a couple hundred dollars less for a trade in, as opposed to a private sale, may be well worth the hassle involved in the latter, for most people.

Regardless of whether the old car is being traded in or sold privately, the seller should have a good idea of what the vehicle is actually worth before coming up with a good price for it. Over-inflated expectations of the value of the car may result in reasonable offers being turned down, while inaccurately low estimates will hurt the seller's pocketbook. A number of online sites provide estimates for both trade ins and private sales.

In the end, it may be best to arrange a down payment rather than a trade in when buying a car. But if that is not possible and a trade in is the only option, do your research beforehand to obtain an estimate of the value of your vehicle. A few hours of research can save you hundreds – if not thousands – of dollars, by fetching you a better price for your trade in than a dealer's lowball offer.

  1. Where can you buy NetSpend reload packs?

    You can only purchase NetSpend reload packs at Giant Eagle, Albertsons, Roundy's and Pathmark supermarkets. NetSpend cards ... Read Full Answer >>
  2. Can your car insurance company check your driving record?

    While your auto insurance company cannot pull your full motor vehicle report, or MVR, it does pull a record summary that ... Read Full Answer >>
  3. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  4. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  5. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  6. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
Related Articles
  1. Stock Analysis

    Will J.C. Penney Come Back in 2016? (JCP)

    J.C. Penney is without a doubt turning itself around, but that doesn't guarantee the stock will respond immediately.
  2. Home & Auto

    Are Kelley Blue Book Values Accurate and Reliable?

    It’s the most popular used-car buying guide. Here’s a look at just how trustworthy it is – plus a comparison with the competition.
  3. Entrepreneurship

    How an Internet Sales Tax Will Affect Your Small Business

    Learn about how the Marketplace Fairness Act may impact small business owners should it pass in the House and what the act requires from business owners.
  4. Savings

    Craft Beer Clubs – Bargain or Not?

    If you're an aficionado of artisanal brews (or would like to be), a beer club can be a palate-pleasing, albeit pricey, way to expand your hops horizon.
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Stock Analysis

    Has Urban Outfitters Lost its Way? (URBN)

    Urban Outfitters just made a bold move. Will it pay off?
  7. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  8. Savings

    Are Wine Clubs Worth It?

    Some points to consider, before committing to a membership for yourself – or as a gift. The right club can also help you save money over the holidays.
  9. Stock Analysis

    Kohl's: Should You Stock Up or Sell? (KSS)

    Many traders are bearish on Kohl's, but long-term investors might want to take a closer look for this simple reason.
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. Duty Free

    Goods that international travelers can purchase without paying ...
  2. Fast-Moving Consumer Goods (FMCG)

    These are consumer goods products that sell quickly at relatively ...
  3. Virtual Good

    A good or product traded in the non-physical realm, typically ...
  4. Buyer's Option

    In commercial contracts, an agreement between a vendor and a ...
  5. Underinsured Motorist Coverage Limits Trigger

    One of the two triggers that can be specified by an insured party ...
  6. Lemon Laws

    Regulations that attempt to protect consumers in the event that ...

You May Also Like

Trading Center