Should You Trade In or Sell Your Car First? Pros, Cons, and Timing

If you're planning to buy a new vehicle, you may be wondering what to do with your current one first. Should you trade it in at the dealership or sell it privately?

Selling privately could get you a higher selling price, while trading in can save you time, simplify the process, and provide potential tax savings when you purchase your next vehicle.

The best choice comes down to how much your vehicle is worth, how quickly you want to upgrade, and whether the potential extra money from a private sale is worth the additional work.

Here’s what to consider before deciding

How Does Trading In a Car Work?

When you trade in your vehicle, the dealership appraises it and provides you with a trade-in offer. If you accept, that amount can be applied toward the purchase of your next vehicle.

Before heading to the dealership, you can find out what your vehicle is worth with Go Auto's online appraisal tool. This gives an estimated value based on your vehicle details. A useful starting point before an in-person inspection is available.

Go Auto uses Canadian Black Book vehicle values as a guide and also considers factors such as:

• Year and kilometres
• Interior and exterior condition
• Maintenance history
• Aftermarket modifications
• Mechanical and reconditioning costs
• Current market conditions
• Current inventory needs

Can Trading In Your Car Save You Money on Tax?

Yes. One benefit of trading in your current vehicle when purchasing another is the potential tax savings.

In Alberta, vehicle purchases usually include 5% GST. An eligible trade-in can lower the purchase price that is subject to GST. Rather than paying GST on the full price of your next vehicle, you usually pay GST only on the difference.

This difference is between the purchase price and the eligible trade-in value.

Trade-In Tax Savings Example

For example:

Next vehicle price: $50,000
Trade-in value: $20,000
Difference: $30,000

Without the trade-in, 5% GST on $50,000 is $2,500.

With the $20,000 eligible trade-in applied to the transaction, 5% GST on the $30,000 difference is $1,500.

That's $1,000 less in GST.

This is why it's important not to compare a private-sale price with a trade-in offer based on price alone. A private buyer may pay more, but the gap can shrink after trade-in tax savings.

It's Faster and More Convenient

Trading in eliminates many of the steps involved in selling privately. You don't have to create an ad, respond to messages, arrange test drives, or negotiate with multiple potential buyers.

You May Save on Tax

When you trade in an eligible vehicle with your next purchase, it can lower the amount used to calculate sales tax.

That means the effective value of your trade may be higher than the trade-in offer alone suggests.

Your Trade Can Reduce How Much You Finance

If your vehicle has positive equity, you can use that value for your next purchase. It can lower the amount you need to finance.

If you are planning your next purchase, explore Go Auto's vehicle financing resources to learn about your options.

You Can Coordinate Your Trade and Next Vehicle

Trading in also makes timing easier. Instead of selling your current vehicle first, you can trade it in when you buy your next one.

What Are the Cons of Trading In Your Car?

A dealership's trade-in offer may be lower than what you could potentially receive from a private buyer.

Dealerships consider factors such as the vehicle's condition, kilometres, market demand, reconditioning costs, and potential resale value when determining an offer.

Before deciding, research your vehicle's value.

What Are the Pros and Cons of Selling Your Car Privately?

Selling privately gives you more control over your asking price and could result in a higher selling price. However, that extra potential value comes with more work.

Pros of Selling Privately

• Potential for a higher selling price
• More control over your asking price
• Ability to wait for an offer you're comfortable accepting

Cons of Selling Privately

• It may take longer to find a buyer
• You have to manage listings and inquiries
• You'll need to arrange meetings and test drives
• You'll be responsible for the transaction and required paperwork
• You could be without a vehicle while shopping for your next one
• A separate private sale doesn't provide the same potential trade-in tax reduction on your next dealership purchase

If you don’t want to trade in your vehicle, but don’t want to sell it privately, you can sell it to Go Auto. You don't have to purchase another vehicle from Go Auto to sell your current one.

Should You Sell Your Car Before Buying a New One?

Timing is another important part of the decision.

Selling your vehicle first gives you certainty. You will know how much money you have for your next purchase. However, it could leave you without transportation while you search for a replacement.

Trading in allows you to coordinate the two transactions. This can be especially helpful if you've already found the vehicle you want and don't want to wait for your current one to sell.

If you're still deciding what comes next, you can browse Go Auto vehicles by total price to see what's available within your budget.

Trade In vs. Sell Privately: Which Is Better?

There's no single answer that works for everyone.

Trading In May Be Better If You:

• Want a quick and convenient process
• Are purchasing another vehicle right away
• Want to benefit from potential tax savings
• Don't want to deal with private buyers
• Want to apply your vehicle's equity toward your next purchase

Selling Privately May Be Better If You:

• Believe you can get significantly more than the trade-in value
• Have time to wait for the right buyer
• Are comfortable advertising and negotiating
• Aren't purchasing your next vehicle immediately
• Don't mind handling the sale yourself

The key is to compare the actual value of both options.

When Is the Best Time to Trade In Your Vehicle?

There's no perfect month to trade in a vehicle. Your vehicle's age, kilometres, condition, maintenance history, and current market demand can all affect its value.

If you’re thinking about an upgrade, checking your vehicle’s value now gives you a useful starting point.

You can also take steps to protect its value before an appraisal. Keeping up with regular maintenance and addressing smaller issues can help. Learn more about how maintenance affects your vehicle's resale value or read Go Auto's Insider's Guide to Getting the Best Trade-In Value.

Can You Trade In a Vehicle You Still Owe Money On?

Yes. Having an outstanding auto loan doesn't automatically prevent you from trading in your vehicle.

The important number is the difference between your vehicle's trade-in value and the amount remaining on your loan.

What Is Positive Equity?

If your vehicle is worth more than you owe, you have positive equity.

For example, if your vehicle is worth $20,000 and you owe $14,000, you have $6,000 in equity. This equity can usually be applied to your next purchase.

What Is Negative Equity?

If you owe more than your vehicle is worth, you have negative equity.

For example, if your vehicle is worth $20,000 but you still owe $23,000, there is a $3,000 difference.

Your dealership can explain your available options and how the remaining balance may affect your next purchase.

For more answers, check out Go Auto's vehicle buying, selling, and trade-in FAQs.

Find Out What Your Vehicle Is Worth at Go Auto

You don't have to decide whether to trade in or sell privately before knowing what your vehicle is worth.

Start with Go Auto's online vehicle appraisal tool to get an estimated value. From there, you can book an inspection and receive a final offer.

You also don't need to purchase another vehicle from Go Auto to sell your current one.

Once you know your vehicle's value, you can compare options, consider tax savings, and choose what works best for you.