Trade In vs. Private Sell – Which Gets You More Money?

It’s finally time to think of getting a new car, what a wonderful time of year indeed. But now you’re faced with a really important question, should I trade it in or sell it privately? This week’s blog post will surely help you decide for yourself which option is better for you. 

Both options have advantages and disadvantages, but ultimately the best deal is what you’re after. We will break down exactly what each option means and compare them to see what option will get you the most money.

What Does Trade In Mean and How Does It Work?

A Trade In is a common choice by many consumers that involves selling the current car back to the dealership and using the money from the sale to purchase another. In Canada, trade in’s can take place at any dealership, regardless if the vehicle was purchased from the company or not. 

The dealer will evaluate the vehicle’s condition; including the body, mechanical components, and car tires, while the consumer shops or waits. Once the trade in value is determined and accepted, paperwork is next to be completed. Signing the documents mean you transfer the trade in to the dealer and the money is put toward financing a new vehicle. 

Necessary Documents Needed for a Trade In

• Personal Identification to prove you can legally sell the car
  • Driver’s license would work 
• Car registration 
• Existing Car Loan (if applicable)
  • Ensure you know how much it is and have the contact information for the financing company readily available   
• New Car Loan (if necessary)
  • Requires proof of income and proof of residency 

How Is the Trade In Value Determined?

When you bring your vehicle in for a trade in appraisal, a couple of areas are looked into to determine the cost:

• The year, make, model, and trim level 
• Extra features and options 
• The kilometers on the odometer 
• The overall condition of the vehicle both interior and exterior
  • Engine, Powertrain, Tires, and Brakes 
• Current Used Car Marketplace Conditions
  • Day’s supply of the vehicle in the local area and current sale value of the vehicle in the local area

FAQ’s Associated With Trade Ins

Can I Trade In my Car for a Used One? 

Yes in most cases you should be able to trade in your current vehicle for one off the dealerships lot. 

How Can I Get the Most Money for my Trade In? 

• Make the necessary repairs
  • Small dings and chips/dents in the paint 
• Clean it Up
  • Run it through a car wash and clean the interior (car detailing) 
• Submit the Car’s Maintenance History
  • Show the dealer how well you have been taking care of the car 
• Know Your Car’s Worth
  • Research is important! Check a website like Kelley Blue Book for a rough estimate
• Negotiate
  • Knowing your car’s worth is important for this suggestion, it will help you get the most value for the vehicle 

When is the Best Time to Trade In my Vehicle? 

It is important to keep in mind, the longer you have the vehicle in your possession, the more it depreciates, and this takes away from the amount or value you would get for the vehicle in a scenario as such. Another contributing factor to the depreciation is the amount of kilometers you drive, the more you drive, the lower the final value, especially when a new model of the same vehicle comes out. If you are currently making payments on your vehicle, this could also be a factor, simply because there will come a time where the payments exceed the car’s worth on the marketplace.  

What is Means to ‘Private Sell’ and How Does the Process Work?

Any interaction between two people outside of a dealership (to sell a car) is considered to be a private sale. Since there is no real professional establishment, all contracts and paperwork must be handled solely by both parties, which puts liability on you. It is important to keep in mind in Canada, every province has their own regulations on how to close the sale. 

Documents Needed for a Private Sale

• Used Vehicle Information Package (UVIP)
  • In Ontario, the seller of a used vehicle is legally required to purchase a UVIP and provide it to the buyer once the car is sold 
  • Includes a range of information: registration history, lien information, etc. 
  • Can be purchased online or at a Service Ontario location 
• Safety Standards Certificate
  • Proves the vehicle meets the minimum safety standards in Ontario
  • There are some rare exceptions, but the certificate is required to put license plates on a car in Ontario 
  • The vehicle must pass inspection at any licensed inspection station in Ontario to get the certificate 
• Bill of Sale
  • Can be hand written or filled out from the template that comes with your UVIP
  • Must include: VIN (Vehicle Identification Number), Vehicle Information (make, model, colour, body type, year, and whether its gas, diesel, or electric), Price paid by the buyer – including any taxes plus GST/HST number if applicable, Name, Address, and Signature of the current owner/dealer/leasing company (seller), Name and Address of the buyer, and Sale/Purchase Date 
• Application of Transfer
  • This is found on the back of your ownership permit and once the interaction is complete you (the seller) will need to fill out the form, sign it, and hand it over to the buyer. The buyer has 6 days to complete the registration of the vehicle and until this is completed, the vehicle will remain with the seller 
  • License plates MUST be removed and cannot be transferred to the buyer 
  • If you want to transfer your plates to another vehicle, you will need to hold on to the plate section of ownership permit
• CARFAX Report
  • This is not necessarily required, however some buyers may request to see a report before moving on with the sale 
  • Includes some of the same information in a UVIP, as well as the vehicles accident history, if it’s been reported stolen, or any safety recalls on the car

FAQ’s Associated With Private Selling

How do I pay for a private car sale in Canada? 

Unlike installment plans offered by dealerships, this is very rare occurrence you will find with private sales. Most private sellers would request payment in the form of cash (either your cash or cash from a loan) including a certified cheque.

Do you pay tax on a private car sale in Canada? 

In Ontario, typically everything is taxed at 13%, and a private sale of a car is no exception. The 13% is still charged on the purchase, however, it is called something different, RST – Retail Sales Tax – and the process to pay it is a little different.

Are you liable for a car after you sell it in Ontario? 

As the seller, any issues that arise after the sale of the car is complete, you are not liable for. If the car is listed “as is” the seller will expect the buyer to know work has to be done on the car after purchase. This may also affect the value of the car on the market, meaning the buyer will expect to pay a lower cost.

Final Thoughts

So it looks like we do have a clear winner at the end and that is Private Selling. It does take a little more work and independence, but it is more valuable. You are able to negotiate easier with the buyer and if you do your research, it makes everything easier. Plus, keep this in mind, with private selling buyers aren’t usually in the market of buying and reselling the vehicle for profit, which typically means you will likely get a higher offer.