Trade-in vs. private sell

Shaw · 11-01-2013, 12:29 PM

I know this might have been asked many times...
I am probably looking at purchasing the new X5 (replacing the X3).
My 2011 X3 28i's mileage has only 19,000km (12,000miles) on it...so a very attractive used car.
The dealer is suggesting a price that I think is $4-5k lower than market value. I know they offer wholesale auction prices...
I'm also aware of the tax saving incentives that I get by trade-in.
So typically the question is, does it make sense to sell the car private and get more money or do the trade-in. I've never sold a car private before so any thoughts from experienced folks here is much appreciated...

trev230 · 11-01-2013, 12:42 PM

Sometimes it works. For example I just traded our 2012 Tahoe on a ML350 for my wife.

I listed the Tahoe in our local Autotrader. A wholesaler contacted me right away and offered X amount for it. That number was higher by $2500K that what the dealer offered for trade in value.

When I went to purchase the new vehicle I told them I would handle my trade on my own and had an offer much higher than the one they provided. They came back to the table with something about $1000 less, which in turn was really the same because of the tax savings of doing everything in one transaction and the same place.

I did the same thing when I purchased my X5 and it worked almost exactly the same way.

chrisny · 11-01-2013, 06:46 PM

I don't know what your sales tax rate is, but here, the difference between selling private and losing the tax savings vs taking trade-in price + tax savings is not enough to make it worth the hassle of selling on your own, at least not to me. Paying to list it, time to let people see it, letting strangers drive your car, etc.. Just not worth the hassle, IMO. Not for a few hundred, maybe $1000 tops. Last time I tried to sell one on my own, I wasted that few hundred on eBay fees and ended up running the car through the auction anyway (had a friend in the used car business).

Shaw · 11-01-2013, 06:58 PM

Quote:

Originally Posted by chrisny

I don't know what your sales tax rate is, but here, the difference between selling private and losing the tax savings vs taking trade-in price + tax savings is not enough to make it worth the hassle of selling on your own, at least not to me. Paying to list it, time to let people see it, letting strangers drive your car, etc.. Just not worth the hassle, IMO. Not for a few hundred, maybe $1000 tops. Last time I tried to sell one on my own, I wasted that few hundred on eBay fees and ended up running the car through the auction anyway (had a friend in the used car business).

Tax here is 13%.
So let me get one thing straight: If I sell private, am I paying taxes out of that selling price or taxes are extra?!

In other words, the price that I see in autotrader, is that including or excluding taxes?
In my scenario the dealer priced my car at $35,000 (13% = $4,550).
My car is listed around $40,000 to $41,000 in autotrader with way higher mileages. Now is that price with taxes, or taxes are extra?
I think I end up par in both scenarios, don't I??!!

chrisny · 11-01-2013, 07:03 PM

It's different everywhere. In NY, if we trade in a car on a purchase of a new car (not a lease), we are only taxed on the difference between the value of the trade-in and the agreed upon price of the new car, not the full price of the new car.. So you save a fair amount of tax on the new car. If instead you sold the car privately, then take that cash and put it down on the new car, you pay tax on the full agreed upon price of the new car. And in the meantime, whoever bought the used car privately gets to go pay sales tax on that too (despite the fact that you already did when it was new).

Here, the buyer is always the one paying tax though. So to your question, if autotrader said its worth 35k, that's not including sales tax that the buyer would pay.

Shaw · 11-01-2013, 07:04 PM

Quote:

Originally Posted by chrisny

It's different everywhere. In NY, if we trade in a car on a purchase of a new car (not a lease), we are only taxed on the difference between the value of the trade-in and the agreed upon price of the new car, not the full price of the new car.. So you save a fair amount of tax on the new car. If instead you sold the car privately, then take that cash and put it down on the new car, you pay tax on the full agreed upon price of the new car. And in the meantime, whoever bought the used car privately gets to go pay sales tax on that too (despite the fact that you already did when it was new).

This is exactly same here...

chrisny · 11-01-2013, 07:08 PM

Quote:

Originally Posted by Shaw

Quote:

Originally Posted by chrisny

It's different everywhere. In NY, if we trade in a car on a purchase of a new car (not a lease), we are only taxed on the difference between the value of the trade-in and the agreed upon price of the new car, not the full price of the new car.. So you save a fair amount of tax on the new car. If instead you sold the car privately, then take that cash and put it down on the new car, you pay tax on the full agreed upon price of the new car. And in the meantime, whoever bought the used car privately gets to go pay sales tax on that too (despite the fact that you already did when it was new).

This is exactly same here...

Our tax rate here is 7.375%. So at 13%, I would think you would save enough on the tax savings by trading it in to match whatever extra amount you would get selling it privately (but losing the tax savings on the new one). Just my guess...

Shaw · 11-01-2013, 07:11 PM

Quote:

Originally Posted by chrisny

Our tax rate here is 7.375%. So at 13%, I would think you would save enough on the tax savings by trading it in to match whatever extra amount you would get selling it privately (but losing the tax savings on the new one). Just my guess...

yes, I think the bottom line is almost the same except the fact that I don;t have the hassle of selling my car if I want to go private...

NikonMan · 11-01-2013, 08:45 PM

Anywhere where you are able to reduce your tax burden by subtracting the trade in value of your vehicle against the taxable value of the new vehicle, you are generally better off grinding the dealership to match the average wholesale (auction) price on your trade. This also makes the transaction and paperwork easier for you as the dealer can take care of it all.

99% of dealers will use Manheim auction results to gauge what they can potentially make on your trade at auction. They will then try to derive profit by offering you less (obviously).

If your trade is something they can put on their used car lot, then its potentially even more lucrative for the dealer as they have the opportunity to "up sell" warranties, service, and finance options for more profit.

If you can get close to the auction price (for your particular vehicle and region), take the tax relief all day long.

The issue is you getting access to Manheim results as a consumer (not easy). All dealerships will have internet access to Manheim - this is what they look at before determining what to "offer" you on trade in value. If you ask, they may share this with you.

If you have this information, you have the data with which to make a better deal.

In CA, we are not allowed to reduce the tax by deducting the trade-in (which is of course double taxation but whatever) - so here it makes no difference with respect to any tax savings.

Brian55 · 11-02-2013, 12:03 PM

It is good to pay close attention to the trade in value the dealer gives, as Shaw suggests. Dealers like to crank up their margins here combined with an attractive price on the new car. It is easy to compare new car prices, but of course all used ones vary. A check in Autotrader for local price ranges will help you calibrate the dealer offer.

To make it better by selling privately you of course have to make up the tax delta. So take what the dealer offers for trade, add the tax amount (in Ontario 13%), plus say $1,000 for hassle in selling privately, and compare to what you think you can easily get. If you can get more, then go for the private sale.

P1 · 11-02-2013, 12:40 PM

When I bought my X5, a private seller bought my 2004 Dodge Ram 2500 for $22K. The dealership only could give me $16.5K for it. Well worth it, even if I could not take advantage of the tax savings if I would have traded it in.

Stephen5242 · 11-03-2013, 06:57 AM

If you have a buyer for your old car you can still do it as a trade through the dealer and save the taxes on your new car purchase. Dealers will do the paper work as a trade to make the sale and the paperwork for the used car sale to your buyer for you. The buyer of your old car pays taxes on his purchase.

It's just a matter of getting your buyer to line his purchase time up with your purchase time.

barcelona · 11-03-2013, 07:49 AM

^ So assuming you want to sell private (used) and buy from dealer (new) and 1) you prearrange your own buyer and 2) dealer willing to do paperwork, you can benefit, from what I understand. New buyer pays tax on net amount (benefit & no used car disclosure package needed) . Old buyer still pays same tax. Dealer is neutral wrt to used but sells a new. If so sounds good.

Stephen5242 · 11-03-2013, 04:35 PM

Quote:

Originally Posted by barcelona

^ So assuming you want to sell private (used) and buy from dealer (new) and 1) you prearrange your own buyer and 2) dealer willing to do paperwork, you can benefit, from what I understand. New buyer pays tax on net amount (benefit & no used car disclosure package needed) . Old buyer still pays same tax. Dealer is neutral wrt to used but sells a new. If so sounds good.

^Yep!

11-01-2013, 12:29 PM	#1
Shaw Lieutenant Colonel 307 Rep 1,806 Posts Drives: 2016 X5 35d \| 2019 X3 30i Join Date: May 2011 Location: Toronto iTrader: (0) Garage List 2016 BMW X5 35d xDr ... [0.00]	Trade-in vs. private sell I know this might have been asked many times... I am probably looking at purchasing the new X5 (replacing the X3). My 2011 X3 28i's mileage has only 19,000km (12,000miles) on it...so a very attractive used car. The dealer is suggesting a price that I think is $4-5k lower than market value. I know they offer wholesale auction prices... I'm also aware of the tax saving incentives that I get by trade-in. So typically the question is, does it make sense to sell the car private and get more money or do the trade-in. I've never sold a car private before so any thoughts from experienced folks here is much appreciated...
	Appreciate 0 Tweet Quote

11-01-2013, 12:42 PM	#2
trev230 Captain 350 Rep 604 Posts Drives: 2022 M5C Join Date: Sep 2013 Location: Charlotte, NC iTrader: (0)	Sometimes it works. For example I just traded our 2012 Tahoe on a ML350 for my wife. I listed the Tahoe in our local Autotrader. A wholesaler contacted me right away and offered X amount for it. That number was higher by $2500K that what the dealer offered for trade in value. When I went to purchase the new vehicle I told them I would handle my trade on my own and had an offer much higher than the one they provided. They came back to the table with something about $1000 less, which in turn was really the same because of the tax savings of doing everything in one transaction and the same place. I did the same thing when I purchased my X5 and it worked almost exactly the same way.
	Appreciate 0 Quote

11-01-2013, 06:46 PM	#3
chrisny Brigadier General 547 Rep 3,307 Posts Drives: 2020 X5 40i Join Date: Apr 2012 Location: NY iTrader: (0)	I don't know what your sales tax rate is, but here, the difference between selling private and losing the tax savings vs taking trade-in price + tax savings is not enough to make it worth the hassle of selling on your own, at least not to me. Paying to list it, time to let people see it, letting strangers drive your car, etc.. Just not worth the hassle, IMO. Not for a few hundred, maybe $1000 tops. Last time I tried to sell one on my own, I wasted that few hundred on eBay fees and ended up running the car through the auction anyway (had a friend in the used car business).
	Appreciate 0 Quote

11-01-2013, 07:03 PM	#5
chrisny Brigadier General 547 Rep 3,307 Posts Drives: 2020 X5 40i Join Date: Apr 2012 Location: NY iTrader: (0)	It's different everywhere. In NY, if we trade in a car on a purchase of a new car (not a lease), we are only taxed on the difference between the value of the trade-in and the agreed upon price of the new car, not the full price of the new car.. So you save a fair amount of tax on the new car. If instead you sold the car privately, then take that cash and put it down on the new car, you pay tax on the full agreed upon price of the new car. And in the meantime, whoever bought the used car privately gets to go pay sales tax on that too (despite the fact that you already did when it was new). Here, the buyer is always the one paying tax though. So to your question, if autotrader said its worth 35k, that's not including sales tax that the buyer would pay.
	Appreciate 0 Quote

11-01-2013, 08:45 PM	#9
NikonMan First Lieutenant 68 Rep 308 Posts Drives: 2017 X5M Azurite on Nutmeg Join Date: Oct 2013 Location: Orange County, CA iTrader: (0)	Anywhere where you are able to reduce your tax burden by subtracting the trade in value of your vehicle against the taxable value of the new vehicle, you are generally better off grinding the dealership to match the average wholesale (auction) price on your trade. This also makes the transaction and paperwork easier for you as the dealer can take care of it all. 99% of dealers will use Manheim auction results to gauge what they can potentially make on your trade at auction. They will then try to derive profit by offering you less (obviously). If your trade is something they can put on their used car lot, then its potentially even more lucrative for the dealer as they have the opportunity to "up sell" warranties, service, and finance options for more profit. If you can get close to the auction price (for your particular vehicle and region), take the tax relief all day long. The issue is you getting access to Manheim results as a consumer (not easy). All dealerships will have internet access to Manheim - this is what they look at before determining what to "offer" you on trade in value. If you ask, they may share this with you. If you have this information, you have the data with which to make a better deal. In CA, we are not allowed to reduce the tax by deducting the trade-in (which is of course double taxation but whatever) - so here it makes no difference with respect to any tax savings.
	Appreciate 0 Quote

		BMW X5 and X6 Forum (F15/F16) > BMW X5 (F15) and BMW X6 (F16) Forum > BMW X5 and X6 (F15/F16) Forum
Trade-in vs. private sell

11-02-2013, 12:03 PM	#10
Brian55 New Member 0 Rep 16 Posts Drives: F15, i4 coming soon, 911 Join Date: Nov 2012 Location: Ottawa iTrader: (0)	It is good to pay close attention to the trade in value the dealer gives, as Shaw suggests. Dealers like to crank up their margins here combined with an attractive price on the new car. It is easy to compare new car prices, but of course all used ones vary. A check in Autotrader for local price ranges will help you calibrate the dealer offer. To make it better by selling privately you of course have to make up the tax delta. So take what the dealer offers for trade, add the tax amount (in Ontario 13%), plus say $1,000 for hassle in selling privately, and compare to what you think you can easily get. If you can get more, then go for the private sale.
	Appreciate 0 Quote

11-02-2013, 12:40 PM	#11
P1 Lieutenant General 11569 Rep 11,136 Posts Drives: 2004 3/4 ton Duramax Join Date: Aug 2007 Location: United States iTrader: (1)	When I bought my X5, a private seller bought my 2004 Dodge Ram 2500 for $22K. The dealership only could give me $16.5K for it. Well worth it, even if I could not take advantage of the tax savings if I would have traded it in.
	Appreciate 0 Quote

11-03-2013, 06:57 AM	#12
Stephen5242 Canada EH! 287 Rep 338 Posts Drives: 335i Join Date: Feb 2009 Location: 3rd Rock from the Sun iTrader: (0)	If you have a buyer for your old car you can still do it as a trade through the dealer and save the taxes on your new car purchase. Dealers will do the paper work as a trade to make the sale and the paperwork for the used car sale to your buyer for you. The buyer of your old car pays taxes on his purchase. It's just a matter of getting your buyer to line his purchase time up with your purchase time.
	Appreciate 0 Quote

11-03-2013, 07:49 AM	#13
barcelona Major 271 Rep 1,417 Posts Drives: X Join Date: Jul 2013 Location: Toronto iTrader: (0)	^ So assuming you want to sell private (used) and buy from dealer (new) and 1) you prearrange your own buyer and 2) dealer willing to do paperwork, you can benefit, from what I understand. New buyer pays tax on net amount (benefit & no used car disclosure package needed) . Old buyer still pays same tax. Dealer is neutral wrt to used but sells a new. If so sounds good.
	Appreciate 0 Quote