‘’Should I sell my car privately’’ is the question I have been getting lately from my friends. They have been to car dealerships recently, and they believe that car dealerships didn’t give them fair value for their car. A close friend of mine (Let’s call him Mike) has a high mileage Nissan Sentra. He was looking to buy a new car and asked dealers to give him a trade-in value, and he has been offered in the range of $1000 to $1800 for his car.
Mike got upset with car dealers and decided to advertise his car on Kijiji and Autotrader since both of them being free for private sellers. The car has been advertised for the last 2 months, and he was asking $4000 originally since he saw some cars advertised around $5000. Last night he called me, and he was so frustrated because people are not just calling him making stupid offers also people are asking him the most ridiculous questions in the world. People are asking if the car has any scratches? Is it automatic even though he put 12 pictures of the car and It clearly says automatic in the ad. Even some used car dealers are calling who pretend to be a private buyer and offering him $1000 to $1500. Mike was so frustrated last night and asked my advice. I wondered what would be absolute lowest would you sell this car right now? He said, “honestly I am ready to take $2000 to $2500”. So I asked him; “why didn’t you traded in 2 months ago”. He said, “because $1800 was too low”. Then I told him that “$1800 has tax savings on top of it”. He said “what do you mean by tax savings” I said, “didn’t your salesperson explain to you?”
What is tax savings? When you trade-in a car to a car dealership, they deduct your trade-in value from the car’s price that you are buying before sales taxes. This varies in different provinces. For example, in Ontario, If I am purchasing a vehicle is priced at $15,000+sales tax and I am trading in a $5000 car;
Asking price: $15,000
Trade-in Value : $5000
Net Price : $10,000 + sales tax
As you see in the calculation above, I am basically getting $5000 + tax (13% HST in Ontario) which is $5650. If Mike traded-in his car for $1800 he would have really got $1800+ tax = $2034. After 2 months of Mike paying for insurance and parking, he is ready to take $2000 to $2500. So what do you think is it better to sell it privately or traded-in? At the end of the day if you have lots of time in your hand and like to deal with people who make no sense, by all means, sell it privately. If time is important to you, work with your dealer, be realistic and understand the challenges then make them an offer.