KICK THE TIRES, NOT YOURSELF

DOLLARS AND SENSE

Common sense answers to questions on personal finance

by Joe Plemon 

Q:  Our family is growing and we now need a mini-van instead of our sedan.  My husband thinks we should sell our sedan ourselves and I think we should avoid the hassle and trade with a dealer.  What do you think? 

A:  I have to side with your husband on this one.  Trading with a dealer will indeed save some hassle,  but you are better off financially to sell your existing car outright and buy from an individual.  The reason is very simple.  Dealers must buy wholesale and sell retail in order to make a living, but you can ask more than wholesale when you sell your sedan yourself and pay less than retail when you buy your minivan from an individual.

            Let’s say, for example,  you are going to sell a 2000 Honda Accord DX Sedan with 100,000 miles and buy a 2005 Chrysler Town and Country LX Minivan with 50,000 miles. 

             Based on Kelly Blue Book ( www.kbb.com), you can reasonably expect to get $2825 trade-in for your Honda but could ask $4.400 if you sell it yourself; netting $1575 more.

                The minivan lists at $9,605 private party transaction and $12,205 retail, so you can save as much as $2600 by buying from an individual. 

             This $2600, coupled with the extra $1575 you made by selling your sedan yourself, nets you $4175 total if all goes perfectly.  Realistically, it probably won’t, but even if you save only half that amount, doing the work yourselves is well worth it.  An additional bonus (in Illinois) is the savings in sales tax.  For this transaction you would save $548 if you buy from an individual compared with buying from a dealer.

 Bonus tip 1:  sell your existing car before buying another car so you won’t become a motivated seller.

 Bonus tip 2: avoid debt and pay cash for your next car.  It will drive better if it isn’t dragging a bank note behind it.