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Recently, one of my graduate school friends asked me for some advice on how he should proceed in buying a car. Unfortunately, I was only able to give him general guidelines on this subject.
Why was this you might ask? The reason lies in the fact that I have been lucky enough to avoid the car buying process since being out of college, since I have been driving my parents' 2004 Honda Accord for the last 7 years. (Side note: Wow! I can't believe it's been 7 years!)
While I may not be the world's foremost expert on the car buying process (after all, the Buying a Car For Dummies book
was written by Deanna Sclar, not Jacob @ MPFJ, haha!), the goal of this multi-part posting series is to force me to do some research on car buying and get some great feedback from you readers out there in the process!So, let's get started answering the question, "What would you do if you needed to buy a car?"
In thinking about how to shed some light on this topic, the best place I found to start was to determine the best way to sell your car (if you are someone who currently has a set of "wheels", like the baby in the picture above).
How To Sell Your Current Car
Step 1 - Determine if selling quickly or selling for the highest price possible is most important
When it comes to selling your car, I believe that people generally fall in to one of two categories. And, the first step in successfully achieving your car-selling goals is to identify to which category you belong. A description of each of these two categories is given below.
- Category 1 - People who want to sell their car as quickly and easily as possible -
- This category describes individuals to whom price is really not the main issue when buying a car. These people are well-off enough to be able to afford a car comfortably, with the biggest concern being that their normal life is not interrupted by the car purchase process.
- Examples of people who fall in to this category are doctors, lawyers, professional workers, etc. that have enough money in their bank accounts to pay for a new car (or can easily obtain the financing required).
- I would propose that these individuals typically receive high enough pay that the extra 10 hours of time that would be required to become a semi-expert in car value in their local area would not be worth it financially. After all, if you are a lawyer or contractor charging $300-$500 per hour, that extra 10 hours could be costing you THOUSANDS of Dollars.
- However, you could also fall in to this category if you simply do not have the will, desire, or capacity to learn about the in's and out's of car buying and car value. While this is perfectly acceptable, I would definitely encourage everyone to read Category 2 below before deciding to which you belong.
- Category 2 - People who need to fight for every bit of value from the sale of their car -
- As you might have guessed, the majority of people fall in to this category, where price and value are the deciding factors for car-purchasing.
- This category includes those of us that need to focus on optimizing our personal finances in order to achieve financial freedom. In other words, people in this category will not achieve financial freedom simply by showing up to a $500 per hour-paying nine to five job every day.
Personally, if I were to sell my car, I would most likely be looking to squeeze every last penny out of the sale. Why is this? Simple! Because as an engineering graduate student, my time is currently only worth $9.58 per hour! (Side note: Wow! I am slightly not impressed by that figure! Maybe I should not have calculated that.)
If I can perform several hours of research and squeeze another $2000 of value out of the sale of my car, it could have a significant positive impact on my personal finances!
So, take a moment and decide which category you belong to before reading the rest of this article...30 sec....45 sec....1min......Got it? Ok, time to proceed!
Step 2 - Determine the value of your car
Having determined what type of consumer you are in Step 1, Step 2 involves determining an appropriate value for your car. Please note that the value of the car is not simply the price that the local used car dealer offers to buy it from you in exchange for positive financing on a new car.
As with many financial actions, selling your car is no different in the respect that there are many great resources available on the internet! Some useful resources that can be used to determine car value are shown below, as well as some specific results for my 2004 Honda Accord.
- Edmunds.com - Used Car Appraisal Tool
- Kelly Blue Book.com - Used Car Value Tool
- Both of these websites are great, FREE, resources that you can use to enter the year, make, and model of your car-to-be-sold, and it will give you 1) dealer trade-in, 2) Private party, and 3) Dealer retail pricing.
- However, I liked Kelly Blue Book's appraisal tool more because there were more customization detail options available in comparison to Edmunds. I feel like this would result in a more accurate appraisal. Nevertheless, the price estimates generated by Edmunds (for my car) were more conservative (lower) and were therefore the ones cited below.
For my 2004 Honda Accord, the pricing is shown below (from Edmunds).
- $5,521 = Dealer trade-in value
- $6,464 = Private party sale value
- $7, 527 = Dealer resale value (so the price the dealer will charge the next person after you sell it to them).
Step 3 - Determine where you want to sell
After determining the estimated value of your car or truck in Step 2, it is now time to cash in your old car and think about where you want to sell it! As was implicated by Step 2 above, there are basically two options here: 1) trading in your used car at the dealership for a new car or 2) selling to a private party that you find.
As can be seen from the pricing estimates above, you can make considerably more money by selling your car to a private party than you can by selling to a dealer. This is due to the fact that the dealer has to pay less in order to turn a profit for himself/herself when he or she sells the car again.
Because of this, I would propose that your selling strategy be based off of the category of consumer you are (discussed previously).
If you fall in to Category 1, the best place to sell your car is to simply trade it in at the dealership. This will be your quickest and easiest option.
If you are in Category 2, things are not so simply, and we are presented with several options for selling our cars to private parties. Each of these options is discussed below.
However, in my opinion, the first step to selling your car publicly is to buy 1-2 nice-looking "For-Sale" signs to place on your car windows. On each of these signs, be sure to list the pertinent details, including price, mileage, year, model, etc. This turns your car in to a rolling advertisement. And, once you have the signs on your car, don't be ashamed to frequently shop at crowded areas where your car in the parking lot will get lots of exposure.
Places to sell your car for Category 2 Individuals
- eBay - eBay's motor section is always a good option. However, you must remember that there will most likely be a hefty selling fee involved.
- Craigslist - Craigslist has become truly a great place to buy and sell items. Listings are FREE!
- Newspaper ads - In the grand scheme of selling a car, the small fee charged by newspaper to list your car are nominal, in my opinion.
- Facebook - Facebook isn't just for teenagers any more! Every one is on it, and Facebook now offers the Facebook Marketplace to buy/sell items.
- Friends/Acquaintances/Word-of-Mouth - This is probably the best alternative because you will not be selling to a complete stranger. However, be sure that both parties get a competitive price, even though you may be friends.
- Online ads on car buying sites (Autotrader.com, Carsdirect.com, Edmunds.com)
Personally, if I were to sell my car, after determining when should I sell my car, I would probably focus on the FREE options first (friends/word-of-mouth and Craigslist). Then, I would move to newspaper ads, car buying website ads, and then to eBay.
How about you all? How would you or have you gone about selling your car? Did you proceed through a dealership or another outlet? Is price or speed of sale most important to you?
Share your experiences by commenting below!
