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So my mother has a 2012 Toyota, and she is not really into it. She is short and it has poor visibility. I want to get her a 2014 Subaru or CRV but I'm trying to figure out what the best approach is. If i trade in the Toyota, we are losing 1- 2k that we could potentially get by selling it to a private buyer. However, we don't have to pay the sales or Transfer tax on the car (NY) for the amount that is traded in, which I think is around 8%, saving around $800. According to my logic, if the trade in value is close enough to the private party value, it seems like trading it in is a good deal, but I might be missing something. Has anyone tabulated this or done a similar comparison?

  • Sorry I was not clear, the trade in value of the toyota is 10k so I would be saving 8 percent of 10k not 1k – user379468 Sep 29 '17 at 14:44
  • A handful of states (California, for example) do not allow this loophole on sales tax savings and you always pay sales tax on the entire purchase price. Y'all lucky in New York! – Rocky Sep 29 '17 at 16:25
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    I'm surprised a dealer would give you a trade-in value so close to the sale value; I'd expect more like 30% less. If they're giving you such a good trade-in, it might actually be that they've overpriced the vehicle they want to sell you and are taking off some of that overcharge and disguising it as a good trade-in value. Thus you might be able to get them to drop the price further without making a trade-in. – R.. Sep 29 '17 at 17:08
  • Many dealerships will handle the transaction for you. They take the car as trade-in and then just immediately sell it to the buyer. – paparazzo Sep 29 '17 at 17:28
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This is a very easy question to answer. Take the value of the trade in ($10,000), add in the discount from sales tax that you will receive, ($800) compare that $10,800 benefit to what you could make selling it privately $11,000–12,000, and determine whether the hassle of selling your car is worth an extra $200–1,200 to you. If it is, sell it privately. If not, trade it in.

Since all those numbers are included in your question (I derived the $10,000 from your estimated sales tax and rate) What more do you think anyone can add here? There is risk selling a car. Someone might try to scam you, or steal the car. Weigh all of that against the possible payout.

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    No, you paid income tax on the money you used to buy that car originally. If they charged it again when you sold the car, that money would be taxed twice. – Nathan L Sep 29 '17 at 14:50
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    @user379468 You're missing the value of your time. Selling a car privately can involve showing it to multiple people, and then you have to do the title transfer. And as Nathan says, it's also a little dangerous to list and sell a car privately. – Dan C Sep 29 '17 at 16:57
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    It's not just crime safety you need to worry about. What happens if 2 weeks after you get rid of your car, something expensive fails and needs a multi-thousand dollar repair. If you traded it, it's entirely the dealers problem one way or another. If you sold it yourself you're probably going to have an irate customer assuming you covered up the problem and wanting you to pay for the repairs. – Dan Neely Sep 29 '17 at 18:53
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    "Someone might try to scam you, or steal the car" - even if they don't do that, you never know who you are selling to! I once sold a car privately, and two weeks later got a visit from the local police who wanted an explanation of why it had been caught on CCTV as likely to have been involved in several burglaries, and was found severely damaged and abandoned in the middle of a nearby city. Luckily I had made sure the ownership transfer documents had been submitted, rather than "trusting" the buyer to do it, which ended my involvement once the paperwork had been processed! – alephzero Sep 29 '17 at 19:45
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    @alephzero Yikes! In those circumstances I'm surprised the payment you got didn't turn out to be a fake/stolen/rubber check. – Dan Neely Sep 29 '17 at 21:00
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You are correct, including the tax savings by trading in a car could make it worthwhile. If the price the dealer gives you, plus the tax savings, is less than you would get from a private party sale, then may still want to consider selling it yourself. But, it could be that the reduced hassle may still make it worth it to you.

If you go into the dealership knowing what you could get for your car in a private sale, then you can make that decision based on how much they'll give you for your trade-in.

https://www.consumerreports.org/trade-ins/the-benefits-of-trading-in-your-car/

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