Selling your car: dealership versus privately

Selling your car: dealership versus privately

There are only a few main options when it comes to selling your car – the most popular being to sell privately, or to sell through a car dealership. So when you need to decide between the two, what’s the difference, and which option will offer you the most value?  

How much is your car actually worth?

The first place to start is to research the value of your current car so you know roughly how much it is worth.

There are plenty of websites that will give you a free valuation online such as carsales.com.au. Visit their free car valuation page and enter your car’s make, model, year, badge and description and it will provide you with a price guide based on both selling your car privately and through a dealership.

For instance, according to carsales.com.au (at time of writing), a 2012 Mazda 3 Neo with automatic transmission will sell for between $15,800 to $17,900 privately and between $12,300 to $14,400 if sold as a trade-in to a dealership. That’s up to $5600 extra if you chose to sell the vehicle privately.

Of course, the only way dealerships can make a profit on your trade-in is by buying it for less than they can sell it, otherwise it’s not worth their time or money to take the car off your hands, fix any damage, detail it and sell it on for you. So it’s highly unlikely you could get the same price selling a car to a dealer as you would selling a car privately.

So, why would you trade-in your car when you could possibly pocket thousands more by selling it privately?

Privately

Private car sales can be costly and can take many months to sell – and that’s where the convenience of trading in a car comes into play.  There are a few things to mull over before deciding to sell your car privately.

Firstly, you need organise advertising for your car. Will you pay for an ad on a car sales website, post it to social media or put up a sign in your car and hope for the best? If you decide to advertise, that will come at a cost – the total of which will depend on how long your car takes to sell.

Secondly, how soon do you need a new car and how much time do you have to email, talk to and meet with potential buyers? You may be lucky to find a buyer who’s happy with the price, condition, kilometres and location of your car immediately, but it’s more likely to take a little bit of time to sell.

And lastly, you will have to compete with extremely competitive new car sales. The CommSec Car Affordability index stated that new car affordability is the best it’s been in 38-years. In fact, it’s the best levels they’ve seen since the 1970s. With new cars so reasonably priced, it can be a hard slog trying to sell a used car when consumers can pay a few extra thousand for a brand new one.

So be prepared, you may think this is the most cost effective way – and it very well could be – but understand also, that it could cost you a lot of your personal time to sell your car privately.

Dealership trade-in

Car dealerships offer convenience because you can sell, buy, finance and fit your new car with accessories – all in one place.

And while you may not get as much money for your current car than if you sold it privately, you have to remember – everything is negotiable. If the dealership is offering you less for your trade than you reasonably wanted, see if you can negotiate elsewhere to gain that money back. Start by negotiating on the price of the trade and then ask them if they can give you a further discount on your new car.

According to a recent Deloitte report, it estimated that car dealerships main profits are made from parts and servicing, which were well ahead of the profits recorded for new or used car sales. So don’t overlook negotiations here – as this could make up for your trade-in loss. Negotiate with your dealer on car loan finance options, car servicing and extras such as tint, satellite navigation or floor mats.

Whether you decide to sell your car privately or trade it in for a new one – make sure you have done your research. Once you’ve made your decision, you can start to look forward to the next one – which is deciding how much you can afford for a new car!

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Learn more about car loans

How much is your car worth?

If you already own a car, you could potentially bring down the cost by selling your car in the process. Before that happens, though, you’ll need to find out how much your car is worth.

One of the first places to find this value is to research the value of your current car, giving you an idea of roughly how much it’s worth in its peak condition.

There are plenty of websites that offer a free online valuation, allowing you to enter your car’s make, model, year, badge and description, with results listing a price guide based on both selling your car privately and through a dealership.

Of course, dealerships will try to profit on your trade-in by buying it for less than they can sell it, making it highly unlikely that you’ll get the same price selling a car to a dealer as you would selling a car privately.

However, private car sales can be costly and can take months to sell, making car trading more convenient with a guaranteed return, even if you may not be able to realise the total value of your car’s worth.

Remember that everything is negotiable. If the dealership is offering you less for your trade than you wanted, try to negotiate elsewhere to gain that money back. Start by negotiating on the price of the trade and then ask them if they can give you a further discount on your new car.

How much is my car worth?

If you own a car, it may be something that can help you bring down the cost of your next vehicle purchase through its sale. However, before you can do that you’ll want to find out how much your car is worth.

Your car’s worth can depend upon various aspects, including:

  • Age
  • Condition
  • Model and make

A great starting place for aspects of this includes websites that offer online valuations, allowing you to enter your car’s make, model, year, badge and description, with the listed results displaying a price guide based on both selling your car privately and through a dealership.

Both have pros and cons, as cars can be very profitable, something that will no doubt impact any chance you have to make the most of your car’s value upon sale. Dealerships will try to profit on your trade-in by buying it for less than they can sell it for, so you shouldn’t expect the same price selling a car to a dealer that you would necessarily get selling a car privately.

Can I buy a car as a student?

Buying a car is a huge financial decision, and shy of marriage and purchasing a house (or perhaps around the world travels), it may be the biggest financial decision you make. But if you’re looking at your empty pockets, don’t despair! Your dream of owning your own car could become a reality, if you look for and compare the right car loans for your circumstances.

What is a car loan?

A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.

What is a secured car loan?

A secured car loan is a loan that is connected to a form of security, or collateral. Generally, the security for a car loan is the car itself. If you fail to repay the loan, the lender might seize your car, sell it and then use the proceeds to recover their debt.

How do you get a car loan?

There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.

Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.

What is trade-in value?

The trade-in value is the price you could realistically charge if you were to sell your car to a dealer while buying a replacement vehicle. Generally, a car’s trade-in value is less than its market value. That’s because the dealer has no interest in buying your car unless it can make a profit – which can only be done if the dealer has room to increase the price.

What is dealer finance?

Dealer finance is a car loan organised through a car dealer – as opposed to car loans organised by a finance broker or directly by the lender.

Can you put a deposit on a car to hold it?

It’s up to individual car dealers to decide whether to promise to hold on to cars in exchange for deposits.

Some car dealers will request a deposit and promise, in return, to hold on to the car for a certain period of time. Others will request a deposit but make no guarantees, other than to return the deposit if they end up selling the car to someone else.

Some car dealers ask for deposits; others don’t. If you get asked for a deposit and you decide to pay it, make sure the dealer gives you signed paperwork before you make the payment and a receipt after you’ve made the payment.

Where can I get a student car loan?

Student car loans are not a necessarily a product in and of themselves, but what you may be looking for is a guarantor car loan.

A guarantor car loan has a third-party act as a form of guarantee for your loan application, telling the bank or lender that if you default on your loan, someone will pay the loan repayments.

Going guarantor on a car loan is no new thing, and before internet-based credit scores, guarantor car loan applicants would apply for loans with a guarantor or property owner who could vouch for the person borrowing the loan.

To get a guarantor car loan, you’ll need someone willing to act as a guarantor for your car loan.

How much can I get towards a new car as a single parent?

It really depends on your financial circumstances as to how much a lender will grant you towards a new car as a single parent. With most lenders, the smaller the loan you apply for, the higher your chances are of approval, so getting a cheaper car or adding some savings of your own, may be a valid option if you are struggling for approval on a car loan.

Can I get a car loan with poor credit?

Poor credit doesn’t necessarily mean you won’t be able to get finance for your car purchase, though your options aren’t likely to be the same as someone with good credit.

In fact, a number of specialist lenders exist offering car finance for customers with poor credit, able to provide access to bad credit car loans.

However having a history of poor credit will likely mark you as a potential risk to lenders, so your car financing needs could see higher fees and interest rates. Alternatively, consider a secured car loan, which is a type of loan that uses the car you purchase as collateral, reducing the risk.

Other options include getting someone close to act as a guarantor for your car loan, or to talk to a broker about a personalised rate specific to your circumstances.

How much can I get towards a new car as a single parent?

It really depends on your financial circumstances as to how much a lender will grant you towards a new car as a single parent. With most lenders, the smaller the loan you apply for, the higher your chances are of approval, so getting a cheaper car or adding some savings of your own, may be a valid option if you are struggling for approval on a car loan.

What is an LVR?

The LVR, or loan-to-value ratio, is a percentage that expresses the amount of money owed on the car compared to the value of the car. For example, if you take out a $15,000 loan to buy a $20,000 car, you have an LVR of 75 per cent. LVRs change over time as you pay off your loan and your car depreciates in value. For example, two years later you might now owe $10,000 on your car, which might now be worth $15,000. In that case, although there would still be a $5,000 difference between the size of the outstanding loan and the value of the car, the LVR would now be 67 per cent.