To sell or to trade-in your car?

Phil Reed of Edmunds.com with his Honda Fit.

Tess Vigeland: At some point, Stephen will have to say goodbye to his car. Mostly likely it will head to the junkyard after 25-plus years of service. But most of us don't run our cars into the ground, even though financially that makes the most sense.

No -- we sell them or trade them in. And guess who's in the middle of that process right now? Phil Reed! So, now to a Nissan dealership and here's what he's trying to unload.

Phil Reed: It's a 2007 Honda Fit Sport. It has a manual transmission, which affects the price too. And it's got 32,000 miles.

Vigeland: And we are here with?

Naseer Birria: Naseer Birria.

Vigeland: And you're an employee here at Nissan.

Birria: That's correct.

Vigeland: So, when someone comes in with a car they'd like to get valued, what's the first step for you?

Birria: There is three ways to give a price for a used car: There's auction value, there's a trade-in value, there's a private party, there's like Kelley Blue Book, that's the price I usually work with them, because does the bank want to go with it and all that, that's where I quote the price for the customer.

Vigeland: Aha, OK. So then Phil, what do you come to this equation with? What kind of information do you have?

Reed: Well, of course, you want to look up the values if you can beforehand, so that you know whether the figure that you're getting from the dealership is good or not, because it varies wildly. For example, you know my car is very good, fuel-efficient car, and in this time period of very high gas prices, that's going to drive the price up. So basically, what I tell people to do is look up all the information that you can. But also look through classified ads to see what your car is selling for by other people in your area.

Vigeland: And then from the dealership perspective, what should people be expecting from you? Should they be expecting to haggle with on the price of that car?

Reed: I have to say all the customers want to haggle. Everybody wants to have a good price. Some people go with the "Kelley Blue Book;" some people with the "Black Book;" some people go with the MMR, this is auction value. There is three prices and I'm choosing from the three prices, which way works better for the dealer. I give a price to the customer. If they're happy with it, I take a trade. If they're not happy, they can sell private party or they can go to another place.

Vigeland: Then, Phil, what is the point of the trade-in value?

Reed: Well, the trade-in value's a reference point. I mean, not every dealership will have the same desires. Some people may already have Honda Fits on their lot, so they don't want your car. Others may have sold one at a really high price yesterday, so they're mad to get more of them. So, the bottom line is, know as much as you can about the price and then shop around and it's the simplest thing to do, because we have some really good options for disposing of your car now. You can put it on eBay, you can sell it through online classifieds, you can take it to your local dealership, like this Nissan dealership and trade it in on a car or maybe even get a check for it. See which one is best for you.

Vigeland: OK. So take us through the paperwork that you have on your Honda Fit. First of all, you still have your sticker.

Reed: I still have my sticker.

Vigeland: Now what does that do for you then?

Reed: It makes me feel good. It makes me feel secure. Actually, what it does is it establishes credibility for what is on the vehicle, like ABS, traction control, stability control, side-impact air bags. You can't easily look at a car and tell if it has those things.

Vigeland: Does that make a difference to you?

Birria: Yes, absolutely. You have to know all the package to get the value for the car.

Vigeland: OK, so you came in with your car and with your sticker.

Reed: Yes, I asked for an appraisal of my vehicle and they were nice enough to run their figures. And the auction value on this is $11,300, and the Kelley Blue Book trade-in value is $10,900. But he was telling me that he's really not prepared to give me that much for the vehicle, is that correct?

Birria: That's correct. I have three Honda Fits in my lot. I'm not going to buy another one. When I don't have it and I have a customer for it, sometime I pay what the customer wants.

Vigeland: Would it make any difference to you if he were coming here wanting to give you this car and take a Nissan in exchange for it?

Birria: I still give him the trade-in value.

Vigeland: The same value.

Reed: The same value.

Vigeland: What's the best way to make a decision, and how did you make a decision, of whether to do a trade-in or a private sale? Obviously, there's a dollar difference, but it might also be easier to go to a dealer, isn't it?

Reed: The convenience factor is what drives trade-ins. However, I have to say that the trade-in is the Achilles' heel for the consumer, because most consumers can't figure out what their price is -- and we've heard it's a very complicated matrix of factors that they come into. And it's very easy for a car salesman to say, "You know, it's not as worth as much as you thought it was." But if you've shopped around and let people know that you're shopping around, it begins to level the playing field, because now you're not just talking to just one person and having to trust them whether that's true or not.

Vigeland: Alright, thanks Phil.

Reed: OK, thank you.

About the author

Tess Vigeland is the host of Marketplace Money, where she takes a deep dive into why we do what we do with our money.

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